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Tesco Eats It

Tesco earnings – lone basket

Image source: Syda Productions, Ned Snowman, seen0001, Early Spring, Akane1988, Tim UR - Shutterstock

What's going on?

Tesco, the UK’s largest retailer, reported weaker-than-expected sales growth on Thursday thanks to a rotten grocery market.

What does this mean?

Tesco’s all-important UK sales grew only 0.4% last quarter versus a year ago, down from 1.7% in the previous three months. And sales in central Europe fell 5%. Tesco, like other retailers, pointed to the weather: an unseasonably cold May chilled sales of beer and ice cream. But with last May the hottest since records began, it was always going to be a tough comparison.

While Tesco remains undisputed king of the British grocery market, the 100-year-old company’s claims to have grown faster than rivals last quarter are questionable. Competition is heating up: Morrisons, currently the UK’s number-four grocer, announced plans on Thursday to expand its same-day home delivery partnership with Amazon. And that’s not all…

Why should I care?

For markets: British beef, or Kramer vs. Kramer?

Investors bought Tesco’s stock following its results, perhaps reassured by its claims to be beating the market. But privately owned rivals have the luxury of keeping their cards close to their chests. According to recent data, the UK’s big four grocers are all still losing market share to German Krämers Aldi and Lidl – the latter of which, not content with its US expansion, announced big plans for London on Wednesday. And Iceland – the aptly named cut-price frozen food specialist – is also opening 50 new UK stores. Second-placed Sainsbury’s, meanwhile, is still looking for alternative ways to grow after its tie-up with Walmart-owned Asda was blocked by regulators.

The bigger picture: Casino’s chips are down.

Across the Channel, French grocer Casino said on Wednesday that it would sell its stake in Brazilian electronic goods retailer Via Varejo. Casino’s owner is struggling to stay afloat after filing for bankruptcy protection last month – it’s in full survival mode, jettisoning excess baggage in order to pay down its debt.

Originally posted as part of the Finimize daily email.

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