UK economy and Tesco diverge

 
Tesco store in London

Tesco this morning announced that in the three months to 23 November, underlying or like-for-like sales in the UK were down either 1.4%, or 1.5%, or 1.6%, depending on which of the three blinkin' measures published by the giant grocer is the most reliable.

There is no point in getting into the nuances of the calculation of this measure of sales, since they all tell the same story - sales down.

Now these figures are obviously not seen by investors as a disaster, since the share price is up a bit this morning.

But at a time when rising household consumption is driving the UK's recovery, according to the official statistics, it is slightly odd perhaps that the UK's biggest retailer should be struggling.

So what is going on?

Well, Philip Clarke, Tesco's chief executive, says: "Continuing pressures on UK household finances have made the grocery market more challenging for everyone since the summer and our third quarter performance reflects this."

He's right that, on the face of it, food retailers in general seem to be having a tougher time. Earlier this week, the BRC-KPMG Retail Sales Monitor showed a fall in like-for-like sales for all food retailers of 0.4%.

However I am sure you have noticed that Tesco seems to be doing worse than the norm.

Start Quote

Shoppers are drifting away from the middle ground, and going either to the out-and-out discounters or trading upmarket”

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Which of course implies, given that Tesco is by far the biggest food retailer, that some food retailers are doing pretty well.

What seems to be happening is that increasingly value-conscious shoppers are drifting away from the middle ground occupied by Tesco, and going either to the out-and-out discounters, like Aldi and Lidl, or trading upmarket to the likes of Waitrose.

That would be the explanation which says Phil Clarke was dealt a difficult hand when he took over from Sir Terry Leahy as chief executive.

But even if that is right, it is not impossible to prosper in that middle ground, as Sainsbury - which has been capturing market share - has been demonstrating.

And there is another thing.

Non-food retailing is doing pretty well across the UK. According to the latest BRC survey, in the latest three month period, non-food like-for-like sales were up 1.5%, a slight deceleration from the August-to-October figures but not too shabby.

Tesco still has a substantial non-food presence, although Clarke took a decision to scale that back some time ago, and does not appear to be benefiting from the general non-food revival.

The bigger story of what's happening in the UK economy is that growth in household consumption has been driving economic recovery. In the latest quarter. the increase in household consumption delivered 0.5% of a 0.8% growth in GDP.

That implies the squeeze at Tesco may be more about the weakness at Tesco than what is happening to consumer spending and the economy in the round

Which of course doesn't resolve the question of whether, because of its history, Tesco is trapped in the squeezed middle, or whether Clarke and his team could have done more to liberate it. Are the poorish sales at Tesco a reflection of duff management or the inheritance by the newish management team of an intractable structural problem?

 
Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    0

    Comment number 318.

    Dear British business, if you treat your staff well and fairly you'll get the best from them and you'll see the benefits. Pander to short term gain (i.e. accountants) means long term loss.

  • rate this
    +1

    Comment number 317.

    Tesco must face facts it will never regain the customers it has lost. I live in a small rural area of mid Wales. Like most shoppers here we do our shopping in the local Audi store. Tesco is only visited for items that Aldi does not stock. Meat and fish come from local dependents.

  • rate this
    0

    Comment number 316.

    Tesco used UK stores as cash cow to fund global expansion -disaster in USA so took the UK customer for granted . Will now find it difficult to win back UK business as Morrison,s starts home delivery and competitors up their game. Top Management overpaid and out of touch new broom needed with customer/staff focus!

  • rate this
    +2

    Comment number 315.

    Aside from the quality of their goods which are generally sub standard, I hate the way Tesco likes to think it can manipulate its customers. Buy 2 for the price of 1, instead of halving the price of each item and giving the consumer the choice whether they want 2 or not. Bread rolls 40p each or £1 for 4... I may not want 4 !!! In Lidl 29p each and much better quality. They just got too greedy.

  • rate this
    +3

    Comment number 314.

    The big problem Tesco has is the quality of it's fresh food isn't great - meat is poor, vegetables taste of nothing. There is a general air that their food palaces just sell 'product' - there is NO passion about what they do compared with Waitrose. Staff are scruffy and glum and some stores look dated. Tesco is all about shifting product whereas food is a very personal thing to consumers.

  • rate this
    0

    Comment number 313.

    All businesses are going to have to get used to fluctuating statistics on sales and profits. Why do markets keep having knee jerk reactions to everything? 1% is nothing. Stay cool and wise up.

  • rate this
    +1

    Comment number 312.

  • rate this
    -2

    Comment number 311.

    Let us not forget, Tesco are also the UK's biggest private employer, not to mention one of the most successful in British retail history.
    Whilst they are to blame for much of the bad press, I for one have started to get bored of the endless witch hunt.

    If we bash them hard enough might it be possible to give away all our money to German discounters instead?

  • rate this
    +4

    Comment number 310.

    People are still losing jobs, good & well paid jobs & many more are due to be lost as majority of public cuts have still not been implemented.

    Even some big private companys are still cutting thousands of jobs.

    These cuts & poor paid new jobs will reflect in retailing, I know of many wholesalers going out of business, many businesses on Ebay are dropping like stones.
    Tesco, reflects UK

  • rate this
    +2

    Comment number 309.

    266.
    John Campbell
    Has any VIP, Celeb.or Politician ever posted a comment on HYS?
    If not.Why not?
    Its all down to education, half the so called celebs can't read let alone string a sentance together. Politicians probably consider it beneath them to go on a common BBC HYS! A great pity because then they would learn what we really think of them.

  • rate this
    +2

    Comment number 308.

    Money is being diverted into paying back booming property loans.

    I reckon the refinancing splurge is going flat and new home owners are always strapped for cash and focused on getting back on their feet.

    Just idle thought from the puddle.

    Wjy aren't bitcoins subject to capital gains tax?
    $illy me. They are of course. Aren't they.

    I thought Tesco's was a TBTF bank. Bailout please. Oh pretty

  • rate this
    +2

    Comment number 307.

    Robert there may be growth in London & the SE due mostly to house price & consequently rent inflation, but the rest of the UK, which the superannuated fools in government seem to avoid, is not experiencing growth.If anything it is seeing stagnant low wages & increased inflation. Tesco is a different matter, poor quality goods, arrogant distant managers at the top, poor service & poor staff.

  • rate this
    +1

    Comment number 306.

    Perhaps because money is tight we want value and quality for our money not cheap over packaged goods which are going soft by the time you get home with them. We are gong for quality, are no longer fooled by Tesco's "clever" pricing which generally tends to be more expensive in the long run; the tragedy is we have lost so many small independent businesses to their ravaging corporate greed.

  • rate this
    +1

    Comment number 305.

    Al Greenspan, the most inimitable of interest raisers, is having another magic moment with Bit Coin http://www.zerohedge.com/news/2013-12-04/greenspan-baffled-over-bitcoin-bubble-be-worth-something-it-must-be-backed-something

    The first occured with Gaussian Copula and David Li, now buried deep in the bowels of PBoC, blowing as almightily hard as can be.

    He never really grasped

  • rate this
    0

    Comment number 304.

    I've shopped at Sainsburys, Asda, Waitrose, & will still choose Tesco.

    All shops play the same pricing game.

    Go in most sports/clothing shops & they are always changing ticket prices & RRPs.
    One day an item will be RRP £70, sale price £35, next day it will be RRP £90 & have a bigger RRP discount but cost £40.

    Dont blame Tesco for what is common throughout majority of all retail

  • rate this
    +2

    Comment number 303.

    I buy at Tesco or anywhere else, fact is I don't buy as much now. Maybe Tesco are giving us real figures that reflect general consumer trends. Apart from xmas who the hell is spending more money ? Consumers are driving up the economy, says who ? We all know real inflation is far higher than " official figures " say, we're all paying more for less than we used to get.

  • rate this
    0

    Comment number 302.

    I've shopped at Sainsburys, Asda, Waitrose, & will still choose Tesco.

    All shops play the same pricing game.

    Go in most sports/clothing shops & they are always changing ticket prices & RRPs.
    One day an item will be RRP £70, sale price £35, next day it will be RRP £90 & have a bigger RRP discount but cost £40.

    Dont blame Tesco for what is common throughout majority of all retail

  • rate this
    0

    Comment number 301.

    You could never hypnotise me to self harm and can`t hypnotise me to go to Tesco.If I did I`d find a company collaborating in hypnosis or "mindrape"just another company to sue in court.You can emit this but I`m not delusional and God help the mindrapist because the legal system won`t.Tesco just another collaborater in the town of mindrape..The UK the country of Mindrape and gangstalking life steal.

  • rate this
    0

    Comment number 300.

    Hmmm........

    Hello tosh, where's bikini. Cheap burkas, get yer burka's going cheap.

    Why would anyone want noisy clothing?

    You burk, that's cheep cheep.

    Where's ya mama gone?

    http://www.zerohedge.com/news/2013-12-04/its-payback-time-foreign-uk-homebuyers-be-subject-capital-gains-tax

  • rate this
    +3

    Comment number 299.

    it is slightly odd perhaps that the UK's biggest retailer should be struggling.

    Rubbish, national growth stats are biased & not reflective of many peoples experiences & Tescos own sales reflects the true reality of many people, low & middle earners.

    Harrods sales are not going down, which further reflects on the attrocious unbalanced nature of this propaganda growth

 

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