Tesco, Morrisons and M&S: Ouch

 
Tesco and Morrison signs

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.

Marks and Spencer, Liverpool

Start Quote

A retailer without a substantial online presence... is on a fast road to obsolescence”

End Quote

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.

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

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  • rate this
    +44

    Comment number 36.

    Things are definitely a lot tighter than 5 years ago, the government is taking money out of the economy in an attempt to balance it's books and most peoples wages haven't kept up with inflation. Perhaps if companies were to pay their staff a bit more, instead of worrying too much about their shareholders dividend, they would find their sales increasing.

  • rate this
    +8

    Comment number 35.

    Can't help the poor giants out as I haven't bought new clothes for many years (except undies). By buying others' cast-offs I keep well dressed for pennies. The clothes I buy are nearly new - sometimes really new, and must have been bought by people with more plastic than sense. Who said shopaholism was bad?

  • rate this
    +3

    Comment number 34.

    I think the Government was relying on consumers to stoke up a "recovery" which does not seem to be happening. So what now.? More funny money? More city based money laundering,

    This is going to further delay any rise in interest rates and I suspect savers will be forced to spend whatever they have left. .

  • rate this
    +3

    Comment number 33.

    I guess it is what you would expect, pile it high sell it cheap and just keep opening retail space days are gone.

    If you don't have good quality, good service, a good online offering and an pricing policy that is understandable, people will just go elsewhere. Nice to see some competition back in the retail sector for a change.

  • rate this
    +3

    Comment number 32.

    In general terms all shops are going to be under pressure for at least the next ten years as the economy focuses more on saving, investment and net exports rather than consumption.
    Also many people will eat less to reduce their lard coefficient which will hit superstores.
    Alan

  • rate this
    +86

    Comment number 31.

    So we don’t have a different model yet.

    We still measure the state of the economy by whether we are buying imports we don’t need with borrowed money, whilst inflating the value of our homes.

    Add to this the fact that no tax is paid on the profits by the large corporates and it becomes obvious we are back on the same rollercoaster of deception.

  • rate this
    +4

    Comment number 30.

    9% rise in essential energy prices, 5.6% fall in essential food sales.

    Yet more evidence the majority of the population are being forced to spread their pay packet more thinly.

  • Comment number 29.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +1

    Comment number 28.

    The extremely limited nature of the Coalition Govt's economic reform is bound to lead back to a '1997-2007' where mini-booms & busts are seen in different parts of the UK economy.

    If we want a stronger, peaceful, steady economy it will be vital to spread prosperity further down the income scale & take taxation (at least temporarily) up the income scale.

  • rate this
    +18

    Comment number 27.

    Food inflation is running higher than the official inflation rate quoted by the government. Therefore, people who have not received pay rises over the last few years are being squeezed and are experiencing reduced standards of living.
    No doubt the ConDems are looking to put a positive spin on this by saying that this will reduce obesity.

  • Comment number 26.

    All this user's posts have been removed.Why?

  • rate this
    +6

    Comment number 25.

    Re 4 & 8: I have to agree. We gave up with Tesco a few years ago. Our local stores were dirty, unstocked, poor quality, and expensive. We now alternate between Aldi and Asda - clean, well stocked, better quality, and cheaper. Even Tesco fuel is expensive 5-7p a litre more than Asda. We don't want BOGOFs and points, we want value - and Tesco and M&S are miles of the pace.

  • rate this
    +6

    Comment number 24.

    When high value items and luxury goods sales are on the up and low value items and basics sales are going down you know the economy is heading the wrong way.

    Some recovery.

  • rate this
    -4

    Comment number 23.

    we forget something more important than the expectations of a fickle financial market. These are all companies that have been around for many years and unlike many that have been and gone will continue to do so.
    Stop the negative critique and praise when praise is due.
    imor

  • rate this
    +6

    Comment number 22.

    The only segments of society that have experienced anything that could be called a recovery are estate agents, landlords, and the banking sector. When will this government admit that its austerity measures are not evidence-based, haven't worked, and are only prolonging the agony for millions of hard-working people in this country?

  • rate this
    +10

    Comment number 21.

    It's hardly surprising - the "recovery" is based on a housing bubble and PPI fuelled purchases of big ticket items.

    No one who just got a few grand from some "lawyers" is going to go out and buy more fruit and veg! They are going to go buy a new car (Vauxhall apparently!) or an iFad, or a huge tv, a holiday etc. And you can get these cheaper away from supermarkets.

  • rate this
    +12

    Comment number 20.

    Surprised there's people splashing out on big things. Like many others my pay has declined around 25% since 2007 while everything has gone up. By the time I pay the inflated utility bills, the inflated grocery bill and hope my 9 year old car keeps running there' bugger all left to spend.

  • rate this
    +33

    Comment number 19.

    Meanwhile, in the real world online retail is booming.

    The supermarkets in their present guise will become extinct eventually just like they forced corner shops and High Streets into extinction.

  • rate this
    +116

    Comment number 18.

    It doesn't matter how many articles you publish trying to suggest it BBC, there is no recovery for the majority of the pubic.

  • rate this
    +48

    Comment number 17.

    The only real recovery is in the imagination of Cameron and his rich cronies.

 

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