LONDON-- Tesco PLC, the U.K.'s biggest grocery chain, posted a
sharp drop in first-quarter sales as it struggles to compete amid
heavy discounting from rivals.
The company said Wednesday its U.K. comparable sales excluding
petrol in the three months through May fell 3.7% on the year,
slightly better than the 4% drop predicted by analysts.
International sales dropped by 8%, though they rose 0.5% at
constant exchange rates. Group sales fell 3.2%.
"As expected, the acceleration of our plans is impacting our
near-term sales performance," said Chief Executive Philip Clarke.
"The first quarter has also seen a continuation of the challenging
consumer trends in the U.K., reflecting still subdued levels of
spending in addition to the more structural changes taking place
across the retail industry," he said.
Tesco has struggled in recent years to compete with discount
chains Aldi Stores Ltd. and Lidl UK GmbH, which are forcing the
U.K.'s big supermarket chains to reduce prices in a fight to retain
customers.
Data published Tuesday showed Tesco suffered its biggest fall in
market share for 20 years. Figures from Kantar Worldpanel showed
the company's share of the U.K. grocery market fell to 29% in the
12 weeks ended May 25, from 30.5% in the year-earlier period.
Of the "big four" U.K. supermarkets, only Asda Stores Ltd., a
unit of Wal-Mart Stores Inc., increased its share of the market,
with J Sainsbury PLC and Wm. Morrison Supermarkets PLC losing
ground along with Tesco. Chains serving either end of the market
performed best, continuing a recent trend, with gains for Aldi and
Lidl and closely-held John Lewis Partnership's upmarket food store
Waitrose holding on to its share.
The fall in first-quarter sales is the latest blow for Tesco
whose shares have shed a quarter of their value since it shocked
investors in January 2012 with its first profit warning in 20
years. Focusing on domestic growth, Tesco has pulled out of the
U.S. and Japan and formed a partnership in China to replace its
ailing solo venture.
Write to Ed Ballard at ed.ballard@wsj.com
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