Tesco misses forecasts, non-food retailers suffer

Tesco misses forecasts, non-food retailers suffer

London: Tesco, the world’s No.3 retailer, posted a smaller-than-expected rise in Christmas sales, joining the ranks of British retailers to blame severe winter weather for hitting purchases of non-food goods.

The increase was better than the declines reported by a string of other British retailers on Thursday, including electricals specialist Dixons, general merchandise group Home Retail, computer games retailer Game Group and car parts to bicycles chain Halfords.

However, it fell short of rises reported by supermarket rivals J Sainsbury and Wm Morrison.

Tesco finance director Laurie McIlwee said this was because the group had more out-of-town stores than its rivals, and so was more disrupted by bad weather, and because it was reporting over a shorter trading period than Sainsbury.

Tesco, which trails industry leader Wal-Mart and France’s Carrefour, said sales rose 6.2% excluding fuel and at constant currencies in the six weeks to 8 January, with overseas sales adding to modest growth at home.

That pattern is likely to be mirrored later on Thursday when Carrefour publishes fourth-quarter sales, as European shoppers worry about austerity measures.

In Britain, where Tesco accounts for about one pound in every seven spent at retailers, grocers have had a better Christmas than most specialist chains as a trend towards one-stop shopping was exacerbated by bouts of heavy snow.

Tesco, which makes about two-thirds of sales and profits in Britain, said Christmas sales at UK stores open at least a year rose 0.6% excluding fuel, but including VAT sales tax.

That is down from a 1.5% rise in its fiscal third-quarter and a forecast increase of about 1.7% in a Reuters poll of 15 analysts.

It is also well below the 3.6% rise posted by rival J Sainsbury on Wednesday.

McIlwee said bad weather probably reduced underlying UK sales by about 1%, and that while underlying food sales rose 1.7%, non-food sales fell 1.5%.

Tesco makes about 25% of its UK sales from non-food ranges, compared with about 15% for Sainsbury’s.

Tesco, with over 5,000 stores in 14 countries, said overseas sales rose 10.1% excluding petrol and at constant exchange rates.

Home Retail said sales at stores open over a year fell at both its Argos stores and Homebase home improvement chain.

Dixons, which runs the PC World and Currys chains, said underlying sales fell 4% in the UK and Ireland, while Game Group reported a 2.1% decline and Halfords a 6.6% drop in underlying retail revenues.