Branding for a Tesco store is seen in London. File picture: Toby Melville Branding for a Tesco store is seen in London. File picture: Toby Melville
London - Tesco chief executive Dave Lewis is ending his first full year at the helm with the stock at an 18-year low, and he is facing a Christmas period that will not deliver any respite.
Sales over the six-week Christmas period will fall by 3 percent on a like-for-like basis, according to analysts at UBS estimate.
That is a steeper drop than the 0.5 percent decline analysts at Sanford C Bernstein foresee for competitor J Sainsbury, and well below the gains achieved by German discounters Aldi and Lidl. Lewis was hired to revive Britain’s biggest retailer, yet so far it has proved far from an easy task. Tesco shares have fallen 20 percent this year, heading for a sixth consecutive annual decline.
Normally the holiday season is when traditional grocers can outperform their no-frills rivals as customers seek finer fare. Yet Aldi and Lidl have convinced Britons that their products are just as good.
Four out of ten shoppers planning to visit a discounter cited product quality as a main reason, according to grocery researcher IGD, which forecasts Christmas spending at those outlets will rise by 17 percent to £1.7bn (R38bn) this year.
While the discounters work to close the gap with Tesco on quality, Lewis wants to close the gap to them on price. He has reduced prices on packages of vegetables such as parsnips that are staples of a typical British Christmas dinner.
“We’ve made our prices simpler, put more colleagues into shops to provide better service and have improved the availability of our most popular products,” a Tesco spokesperson said.
Since Lewis started at Tesco, persistent deflation of grocery prices means that sales growth has been elusive, leaving the chief executive to focus on what he can control – increasing the amount shoppers put in their carts. Failure to deliver that volume growth would undermine the premise of Lewis’s turnaround, according to Mike Dennis, an analyst with Cantor Fitzgerald.
Bloomberg