TESCO received an unwelcome early Christmas message from City analysts yesterday, as predictions of a further decline in third quarter like-for-like sales sent its shares down 2.5 per cent.
Barclays predicted yesterday that the UK’s largest supermarket will report a 1.8 per cent fall in UK like-for-like sales next week compared with flat sales in the second quarter.
“It seems unlikely that Tesco’s third quarter trading statement will be the turning point that the market is looking for,” analyst James Anstead said, blaming weak market growth.
The latest Kantar Worldpanel data showed that all four of the UK’s biggest supermarkets are losing market share to discounters Aldi and Lidl and upmarket chain Waitrose, as consumers polarise their spend between bargain and luxury items.
Tesco has seen its share of the market fall under the 30 per cent mark for the first time in 18 months.
Shore Capital, which also predicts a like-for-like sales decline of one to two per cent, raised fears yesterday over Tesco’s aggressive promotions. The retailer has been investing heavily in vouchers to lure customers back into stores with money off their next shop.
“Such vouchers raise questions, again, as to the sustainability of Tesco UK’s margins. This is a live debate, most often revolving around the need for Tesco UK to cut prices more to meet the challenge of the discounters,” Shore Capital analyst Clive Black said.