Tesco, Morrisons and M&S: Ouch

  • 9 January 2014
  • From the section Business
  • comments
Tesco and Morrison signs Image copyright PA

The patchy nature of a recovery in spending by households is shown in a fall in underlying sales at three of the UK's biggest and most famous retailers, Tesco, Morrisons and Marks & Spencer - while there were rises at Greggs and New Look.

What is also evident is the very fast growing importance of online sales, especially via mobile phones and tablets.

Worst results were from Morrisons, which has the smallest online presence. Its so-called like-for-like sales fell 5.6%.

At the market leader, Tesco underlying sales in the UK fell 2.4% in the six weeks of Christmas and overseas sales were down 3.6%.

But Tesco's online sales in Britain were a big £450m, up 14%.

As for Marks & Spencer, its underlying sales in core general merchandise fell a worse-than-expected 2.1% over three months - because few bought winter clothes in warm October - but nudged up slightly, by 0.5%, in the last two months.

Strikingly - and perhaps embarrassingly for Morrisons and Tesco - M&S's food sales were 1.5% higher on a like-for-like basis over the eight weeks of Christmas, and 1.6% higher over the third quarter of its financial year.

So when you pull all this together, what does it mean for the owners of these large businesses?

Well Morrisons has warned that its profits will be at the lower end of expectations, as a result of its "disappointing" sales performance.

By contrast, Marks says that an improvement in the profitability of its food sales will offset a squeeze in clothing and homeware.

Image copyright PA

As for the Tesco leviathan, it still expects trading profit to be in the range of £3.2bn to £3.4bn.

Even so, today's results confirm the structural difficulties faced by all three of these giants - which is why, at a time of rising household consumption, none are benefiting as Next, John Lewis and (to a lesser extent) Sainsbury have done.

And the more general industrial picture?

It is important to note that households are currently splashing out on bigger and more expensive items, such as electronics, DIY and cars, but are still being very careful and cautious in their everyday expenditure on food and clothing.

But there is bigger lesson - which is that a retailer without a substantial online presence, including mobile, is on a fast road to obsolescence.

Morrisons, slightly plaintively perhaps, points out that the first deliveries from Morrisons.com start tomorrow.