Tesco readies service changes after “disappointing” sales

Tesco is planning a raft of marketing initiatives to boost performance in the wake of “disappointing” Christmas sales from its UK stores, which analysts blame on “marketing failures”.

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The supermarket posted a “disappointing” 1.3% fall in like-for-like sales growth in the seven weeks to 7 January while total sales increased 1.7%.

The figures are in stark contrast to Sainsbury’s which yesterday hailed its “best ever” Christmas and a 4.8% rise in like-for-like sales in the final 14 weeks of the year. Morrisons has also reported a modest 0.7% increase in like-for-like sales over the Christmas period.

Philip Clarke, Tesco Group CEO, concedes that the results are disappointing but that the supermarket is “determined to move faster” to improve.

He says: “In a challenging economic environment, we made good progress internationally but despite record sales, we are disappointed with our seasonal trading performance in the UK.

“We will continue the process of change that we started nine months ago to address long-standing business issues.”

Clarke claims that the supermarket will remain committed to its Big Price Drop initiative but says “there is much more we can do to further improve our shopping trip for customers.”

In the coming year, Tesco plans to “substantially increase investment to deliver an even better shopping trip for customers” and expects “minimal” profit growth for the year. It will outline the plans in April.

The latest Kantar Worldpanel market share figures show that Tesco lost ground during the final 12 weeks of the year slipping to 30.1% from 30.5% last year.

Richard Perks, retail analyst at Mintel, has called on Tesco to drop its Clubcard scheme, saying that the supermarket has been too committed to it for too long, adding that the results are a “marketing failure”.

He comments that in the 1992 recession, when Tesco reported similarly dramatic underperformance, it lead to a massive overhaul of the chain’s positioning and the introduction of the slogan “Every Little Helps”.

Tesco’s international business performed much better with total group sales in the six weeks to 7 January up 4%. The US business Fresh & Easy reported a 19.3% increase in like-for-like sales boosted by a “very strong” Christmas.

Last year, Tesco’s brand value fell dramatically despite its investment into high profile marketing activity, according to YouGov Brand Index figures. Its overall brand perception had suffered the biggest fall of the Big Four supermarkets in the past 12 months, and it has skipped from second into third place.

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