Price cuts lead to 3.7% drop in Q1 LFL sales at Tesco - UPDATE

4th Jun 2014 07:08

The decline in like-for-like (LFL) sales at Tesco's UK business worsened in the first quarter as the recent wave of price cuts across the grocery industry began to take its toll on supermarkets' top lines.UK LFL sales excluding petrol fell by 3.7% in the first three months of Tesco's fiscal year, worse than the 2.9% drop recorded in the fourth quarter. This was slightly better than the 4% drop expected by analysts. Despite the 'beat', however, the shares erased early gains to fall into the red by mid-morning on Wednesday.David Bulk, Market Commentator from Panmure Gordon, said that the 3.7% LFL decline "by any standards, represents an unacceptable performance".Chief Executive Philip Clarke said that the company is now "more competitive than we have been for many years", as it cut prices across a number of lines, reduced home delivery charges and made its Grocery Click & Collect service free.However, he admitted: "As expected, the acceleration of our [price cut] plans is impacting our near-term sales performance.""The first quarter has also seen a continuation of the challenging consumer trends in the UK, reflecting still subdued levels of spending in addition to the more structural changes taking place across the retail industry."Across the group, headline sales declined by 3.8% excluding petrol, as a "significant currency impact" held back sales abroad. At constant exchange rates, the decline was limited to just 0.9%.LFL group sales excluding petrol fell by 3.2% with all regions contributing to the decline."We are pleased by the early response to our accelerated efforts to deliver the most compelling offer for customers. We expect this acceleration to continue to impact our headline performance throughout the coming quarters and for trading conditions to remain challenging for the UK grocery market as a whole."The stock was down 1.4% at 293.25p, after having risen strongly at the open.BC