Tesco, Morrisons and M&S results reveal unhappy Christmas
Tesco reported a 2.4% dip in like-for-like sales for the six weeks to January 4, blaming a weak grocery market.
But amid the gloom, the UK’s top retailer reported taking more than £1bn in the five days before Christmas, including its biggest trading day.
There was brighter news too on online sales – reflecting a trend among most UK retailers. Tesco achieved £450M of UK online sales in just six weeks, up by 14%, including more than 3M online grocery orders, up by 11% on the same period last year.
Morrisons posted like-for-like sales down by 5.6% (7.1% including fuel) in the six weeks to January 5 2014. Total sales, excluding fuel were down by 1.9% (and by 3.3% including fuel). The retailer described Christmas trading as “very challenging” with a slowdown in market growth.
“Hard-pressed consumers elected to economise and managed their budgets very tightly, buying less and shopping selectively across a range of formats and retailers,” it said.
The retailer also blamed its “disappointing” results on discounting by rivals and the growing importance of online and convenience channels – both areas in which Morrisons lacks a commanding presence.
Online and convenience channels
M&S sales also fell during the 13 weeks to December 28 2013, with food and online sales providing two bright spots. General merchandising like-for-like sales fell by 2.1% compared with the same period of the previous year.
But food like-for-like sales rose by 1.6% and e-commerce sales climbed by 22.7%. International sales grew by 4.5%.
Tesco’s results lead city analyst Shore Capital to downgrade its advice on the retailer’s stock from ‘buy’ to ‘hold’ and to cut its forecasts. Its analysts Clive Black and Darren Shirley said Tesco’s performance reflected well on the performance of its rival Sainsbury, which reported its results yesterday (January 8).
Black and Shirley agreed M&S’s results were “disappointing” and downgraded their recommendation on the retailer’s stock from ‘buy’ to ‘hold’.
‘Quite awful’
But it was for Morrisons that they reserved their harshest criticism, slating it as “a surprise and disastrous Christmas update”. The retailer’s Christmas trading was “quite awful”, they said.
“If we take inflation into account, then the volume position is truly disastrous, with negative operational gearing, compounded by vertical integration, eating into margin.”
Meanwhile, it was a happy Christmas for high street baker Greggs. The firm reported total sales up by 4.8%, with like-for-like sales up by 3.1% for the five weeks to January 5 2014. But the baker warned 410 jobs were at risk, as it closed in-store bakeries and simplified management.
Read more about Morrisons' “disastrous Christmas update” here.
What the retail bosses said:
Philip Clarke, chief executive Tesco: “We continued to invest in the most compelling offer for the tens of millions of customers who chose to shop with us this Christmas, but further weakness in the grocery market as a whole continued to impact our performance in the UK.”
Marc Bolland, chief executive M&S: “We delivered an improved performance in general merchandise [GM] over the important Christmas period, with sales up 1.5% in a highly promotional market. However, an exceptionally unseasonal October, which saw GM sales down strongly, has resulted in a quarterly performance below our expectations.”
Dalton Philips, ceo Morrisons: “In a very tough market our sales performance over Christmas was disappointing. However we are firmly focused on driving our core business and accelerating our penetration of the fast growing channels. Our convenience business is building towards an operation of scale and the first food deliveries of Morrisons.com will be made tomorrow, reaching half of UK households by the end of the year.”
