Tescos UK decline was driven primarily by a weaker grocery market

Tesco's UK decline was driven primarily by a weaker grocery market

Tesco saw online clothing sales soar over the Christmas period, but a decline in UK like-for-like sales pushed shares down this morning (9 January).

Further weakness in the UK grocery market contributed to a 2.4% drop in UK like-for-like sales for the retail giant in the six weeks ended 4 January. Total domestic sales were down 1.5%.

The decline was driven primarily by a weaker grocery market, and also reflect the impact of a tougher comparative, Tesco said. 

"Our decision to significantly reduce our new store opening programme and our ongoing work to transform our general merchandise offer are also holding back top-line performance in the short term, particularly relative to others in the sector," the retailer said.

Group sales in the six week period slid 1.2%. Tesco said it had seen an improved performance in Europe with a better like-for-like sales performance than its previous quarter across every market. Total sales for Europe dropped 0.8%.

Tesco's shares were down 3.8% at 08:54 this morning to 316.25 pence.

Nonetheless, Tesco said it has recorded online clothing sales growth of over 70%, with more customers experiencing its next generation clothing departments in-store, which have now rolled out to around 100 stores.

Recent political disruption in Thailand, however, weighed on the grocer's Asia performance where sales fell 0.6%, with a "slightly weaker" like-for-like sales performance than the third quarter.

International sales were also down, by 0.7%, mainly impacted by foreign exchange rates.

Tesco said it expects to report a full-year group trading profit within the range of current market expectations, which it said ranged between GBP3.16bn (US$5.2bn) and GBP3.41bn.