TIDMTSCO
RNS Number : 6219B
Tesco PLC
08 January 2015
8 January 2015
TRADING STATEMENT for 19 weeks ended 3 January
2015
===============================================
-- Investing in a better offer for Tesco customers is driving a
step up in underlying business performance
-- Broad-based improvement in the UK business resulting in
like-for-like sales performance of (2.9)% in last 19 weeks versus
(5.4)% in Q2. This includes like-for-like sales performance of
(0.3)% for the six-week Christmas period
-- All UK formats and categories improved like-for-like
performance. In the six week Christmas period, this included:
o Grocery home shopping +12.9%, general merchandise online
+22.2% and clothing online +52.4%
o Express format +4.9%, overall general merchandise +4.8% and
fresh food volume growth for first time in five years
-- Europe returned to positive like-for-like sales growth of +1.0% in last six weeks
-- Announcing progress on our immediate priorities, including a
significant cost-efficiency programme and a reduction in capital
expenditure to GBP1bn in 2015/16
-- Decision not to pay a final dividend for 2014/15
Dave Lewis - Chief Executive
=============================
"We are seeing the benefits of listening to our customers. The
investments we are making in service, availability and selectively
in price are already resulting in a better shopping experience. A
broad-based improvement has built gradually through the third
quarter, leading to a strong Christmas trading performance.
I would like to thank all of my colleagues in Tesco. The unique
combination of retail expertise and real passion for the customer
has been an inspiration to be a part of. In difficult circumstances
the team has begun the challenging task of reinvigorating our
business. There is more to do but we have taken the first important
steps in the right direction.
We have some very difficult changes to make. I am very conscious
that the consequences of these changes are significant for all
stakeholders in our business but we are facing the reality of the
situation. Our recent performance gives us confidence that when we
pull together and put the customer first we can deliver the right
results."
Like-for-Like Sales Growth (Inc. VAT, Exc.
Fuel)
=======================================================================================
Q1 2014/15 Q2 2014/15 Q3 2014/15 Christmas 19 Week
Period(*) Period
2014/15 2014/15
----------- ----------- ----------- ----------- ---------
(A) + (B) = (C)
---------------- ----------- ----------- ----------- ----------- ---------
UK (3.7)% (5.4)% (4.2)% (0.3)% (2.9)%
---------------- ----------- ----------- ----------- ----------- ---------
Asia (3.2)% (4.9)% (5.0)% (3.9)% (4.6)%
---------------- ----------- ----------- ----------- ----------- ---------
Europe (1.0)% (2.5)% (1.2)% 1.0% (0.4)%
---------------- ----------- ----------- ----------- ----------- ---------
International (2.2)% (3.7)% (3.1)% (1.3)% (2.5)%
---------------- ----------- ----------- ----------- ----------- ---------
Group (3.2)% (4.8)% (3.8)% (0.6)% (2.7)%
---------------- ----------- ----------- ----------- ----------- ---------
(*) For the six weeks ended 3 January 2015
UPDATE ON OUR PRIORITIES
=========================
Following a briefing of Tesco colleagues Dave Lewis and Alan
Stewart will be updating investors and analysts at 11.30am this
morning with further detail on our Christmas trading performance.
In addition they will share more details on progress against our
three immediate priorities:
1. Regaining competitiveness in core UK business, including:
-- the appointment of Matt Davies, Group Chief Executive of
Halfords Group plc, as the new CEO for the UK and Ireland business,
effective 1(st) June
-- a restructuring of central overheads, simplification of store
management structures and increased working-hour flexibility,
delivering savings of c.GBP250m per year at a one-off cost of
GBP(300)m
-- flat investment in payroll, the introduction of a flexible
benefits package for store colleagues and a turnaround-based bonus
for all colleagues
-- a decision to consolidate head office locations, closing
Cheshunt in 2016 and making Welwyn Garden City the UK and Group
centre
-- the closure of 43 unprofitable stores
-- our latest initiative to set lower prices on some of the nation's favourite brands
2. Protecting and strengthening the balance sheet,
including:
-- a significant revision to our store building programme
-- the initiation of consultation to close the company defined
benefit pension scheme to all colleagues
-- a significantly reduced capital expenditure budget in 2015/16 of GBP1bn
-- the disposal of Tesco Broadband and Blinkbox to TalkTalk
-- the appointment of advisors to explore strategic options for the dunnhumby business
-- the decision not to pay a final dividend for 2014/15
-- these actions are the first steps in strengthening the
balance sheet. Further initiatives which maximise shareholder value
are under consideration
3. Rebuilding trust and transparency, including:
-- the next step in re-establishing trust in our pricing policy
-- the progress made against our three major social responsibility initiatives
-- regenerating relations with suppliers with new commercial
income guidelines and associated year end cash management
Group trading profit guidance of no more than GBP1.4bn for
2014/15 is maintained. The immediate priority for proceeds from the
new level of financial discipline and cost control will be
reinvestment in our core customer proposition.
The full presentation will be webcast live and available to
download on our website from 11.30am at
www.tescoplc.com/investors.
Trading Update
===============
Group sales
Group sales for the 19 weeks to 3 January 2015 declined by
(0.6)% at constant rates, including fuel and (1.0)% excluding fuel.
At actual rates, sales declined by (1.9)% including fuel and by
(2.3)% excluding fuel.
UK performance
We delivered a marked improvement in our performance across the
period. Total UK sales including VAT and fuel for the full 19 weeks
to 3 January declined by (0.7)% compared to a decline of (3.2)% in
the second quarter, and decreased by (1.3)% excluding fuel.
Like-for-like sales (excluding fuel) decreased by (2.9)% for the 19
week period, compared to a decline of (5.4)% in the second quarter.
This included a gradual improvement through the third quarter and
resulted in a like-for-like sales performance of (0.3)% for the
six-week Christmas trading period.
The encouraging response from customers follows the investments
we have made across the store offer. We have seen strong
improvements in satisfaction with prices, availability, queues and
store standards following the introduction of more than 6,000 new
colleagues in customer-facing roles in store.
Our new commercial approach includes a comprehensive review of
product ranges to simplify them, reset prices and improve
availability. We are increasing shelf capacity for our 1,000
bestselling lines resulting in significant improvements in product
availability, particularly in the evenings.
Like-for-like volume growth in fresh food was positive over the
Christmas period, for the first time in five years. Within this,
performance was particularly pleasing in produce where we have
already made significant progress in the quality, freshness and
competitiveness of our offer. Our market-leading 'Festive Five'
deal where five key produce items were reduced to 49p, helped
millions of customers enjoy feeding their families and friends for
less.
Our overall general merchandise performance stepped up to
positive like-for-like sales growth over Christmas helped by the
success of our seasonal and gifting ranges. Black Friday promotions
resulted in the highest week of sales on record for Tesco Direct,
contributing to 22.2% like-for-like sales growth in online
merchandise for the Christmas period.
Customers also benefited from a strong offer in our convenience
and online grocery businesses over the seasonal period, resulting
in like-for-like sales growth of 4.9% and 12.9% respectively. Our
share of the online grocery market improved as customer numbers
rose strongly including a significant increase in the proportion of
customers taking advantage of our Click & Collect
locations.
International performance
In Asia, total sales for the 19 week period declined by (1.5)%
at constant rates, with like-for-like sales declining by (4.6)%.
Market conditions across the region remain challenging. In
Thailand, sales trends improved over the period as we annualised
the impact of the external pressures linked to political disruption
last year. In Korea, a higher number of enforced Sunday closures
under the DIDA opening regulations affected the performance of all
large retailers.
In Europe, total sales increased by 0.4% at constant rates for
the 19 week period, excluding fuel. The like-for-like sales
performance for the region, though still held back by our
performance in Ireland, improved from (2.5)% in the second quarter
to (1.2)% in the third quarter. Further improvement in all markets
resulted in positive like-for-like sales growth of 1.0% for the
Christmas period.
Tesco Bank
Sales at Tesco Bank increased by 3.0%, due to a broader product
range in mortgages and loans, although this was partly offset by a
more competitive insurance market.
Contacts
Investor Relations: Chris Griffith 01992 644 800
Media: Tom Hoskin 01992 644 645
Brunswick 0207 404 5959
Appendix 1 - Like-for-Like Sales Growth (Inc.
VAT, Exc. Fuel)
========================================================================================
Q1 2014/15 Q2 2014/15 Q3 2014/15 Christmas 19 Week
Period Period
2014/15 2014/15
----------- ----------- ----------- ---------- ---------
(A) + (B) = (C)
------------------ ----------- ----------- ----------- ---------- ---------
UK (3.7)% (5.4)% (4.2)% (0.3)% (2.9)%
------------------ ----------- ----------- ----------- ---------- ---------
inc. VAT,
inc. fuel (3.8)% (5.0)% (3.2)% 0.1% (2.1)%
------------------ ----------- ----------- ----------- ---------- ---------
exc. VAT,
exc. fuel (3.8)% (5.5)% (4.4)% (0.5)% (3.1)%
------------------ ----------- ----------- ----------- ---------- ---------
exc. VAT,
exc. fuel,
IFRIC 13
compliant (4.0)% (5.5)% (5.1)% (1.2)% (3.7)%
------------------ ----------- ----------- ----------- ---------- ---------
Asia (3.2)% (4.9)% (5.0)% (3.9)% (4.6)%
------------------ ----------- ----------- ----------- ---------- ---------
Malaysia (2.3)% (6.8)% (8.7)% (6.0)% (7.8)%
------------------ ----------- ----------- ----------- ---------- ---------
South Korea (2.8)% (4.7)% (4.0)% (4.0)% (4.0)%
------------------ ----------- ----------- ----------- ---------- ---------
Thailand (5.3)% (4.7)% (4.5)% (1.8)% (3.5)%
------------------ ----------- ----------- ----------- ---------- ---------
Europe (1.0)% (2.5)% (1.2)% 1.0% (0.4)%
------------------ ----------- ----------- ----------- ---------- ---------
Czech Republic 1.6% 1.3% 2.9% 5.7% 3.9%
------------------ ----------- ----------- ----------- ---------- ---------
Hungary^ 2.7% (0.6)% 1.4% 4.2% 2.5%
------------------ ----------- ----------- ----------- ---------- ---------
Poland 0.5% (2.4)% (2.5)% (1.2)% (2.0)%
------------------ ----------- ----------- ----------- ---------- ---------
Slovakia (5.8)% (4.6)% (2.1)% 0.8% (1.0)%
------------------ ----------- ----------- ----------- ---------- ---------
Turkey 3.4% 3.6% 6.7% 13.7% 8.9%
------------------ ----------- ----------- ----------- ---------- ---------
Republic
of Ireland (5.5)% (7.3)% (6.2)% (5.5)% (6.0)%
------------------ ----------- ----------- ----------- ---------- ---------
International (2.2)% (3.7)% (3.1)% (1.3)% (2.5)%
------------------ ----------- ----------- ----------- ---------- ---------
Group (3.2)% (4.8)% (3.8)% (0.6)% (2.7)%
------------------ ----------- ----------- ----------- ---------- ---------
(^) Following the introduction of legislation preventing large
retailers from selling tobacco in mid-July 2013, Hungary
like-for-like growth is shown on an exc. tobacco basis. Including
tobacco sales, in 2014/15, Q1 was 0.0%, Q2 was (2.0)%.
Appendix 2 - Total Sales Growth at Constant
Rates
======================================================================================
Q1 2014/15 Q2 2014/15 Q3 2014/15 Christmas 19 Week
Period Period
2014/15 2014/15
----------- ----------- ----------- ---------- ---------
(A) + (B) = (C)
----------------
Including
Fuel:
---------------- ----------- ----------- ----------- ---------- ---------
UK (2.0)% (3.2)% (1.7)% 1.5% (0.7)%
---------------- ----------- ----------- ----------- ---------- ---------
Asia 1.5% (0.9)% (1.7)% (1.0)% (1.5)%
---------------- ----------- ----------- ----------- ---------- ---------
Europe (0.7)% (1.9)% (0.6)% 0.8% (0.1)%
---------------- ----------- ----------- ----------- ---------- ---------
International 0.5% (1.4)% (1.1)% (0.1)% (0.7)%
---------------- ----------- ----------- ----------- ---------- ---------
Tesco Bank 3.6% 5.8% 2.7% 3.8% 3.0%
---------------- ----------- ----------- ----------- ---------- ---------
Group (1.2)% (2.5)% (1.5)% 1.0% (0.6)%
---------------- ----------- ----------- ----------- ---------- ---------
Excluding
Fuel:
---------------- ----------- ----------- ----------- ---------- ---------
UK (1.7)% (3.3)% (2.6)% 1.2% (1.3)%
---------------- ----------- ----------- ----------- ---------- ---------
Asia 1.5% (0.9)% (1.7)% (1.0)% (1.5)%
---------------- ----------- ----------- ----------- ---------- ---------
Europe (0.6)% (1.6)% (0.3)% 1.6% 0.4%
---------------- ----------- ----------- ----------- ---------- ---------
International 0.5% (1.2)% (1.0)% 0.3% (0.5)%
---------------- ----------- ----------- ----------- ---------- ---------
Tesco Bank 3.6% 5.8% 2.7% 3.8% 3.0%
---------------- ----------- ----------- ----------- ---------- ---------
Group (0.9)% (2.5)% (2.0)% 0.9% (1.0)%
---------------- ----------- ----------- ----------- ---------- ---------
Appendix 3 - Total Sales Growth at Actual Rates
======================================================================================
Q1 2014/15 Q2 2014/15 Q3 2014/15 Christmas 19 Week
Period Period
2014/15 2014/15
----------- ----------- ----------- ---------- ---------
(A) + (B) = (C)
----------------
Including
Fuel:
---------------- ----------- ----------- ----------- ---------- ---------
UK (2.0)% (3.2)% (1.7)% 1.5% (0.7)%
---------------- ----------- ----------- ----------- ---------- ---------
Asia (8.9)% (6.4)% (2.5)% (0.5)% (1.9)%
---------------- ----------- ----------- ----------- ---------- ---------
Europe (7.1)% (10.5)% (8.7)% (5.7)% (7.6)%
---------------- ----------- ----------- ----------- ---------- ---------
International (8.0)% (8.4)% (5.6)% (3.3)% (4.8)%
---------------- ----------- ----------- ----------- ---------- ---------
Tesco Bank 3.6% 5.8% 2.7% 3.8% 3.0%
---------------- ----------- ----------- ----------- ---------- ---------
Group (3.7)% (4.7)% (2.8)% 0.0% (1.9)%
---------------- ----------- ----------- ----------- ---------- ---------
Excluding
Fuel:
---------------- ----------- ----------- ----------- ---------- ---------
UK (1.7)% (3.3)% (2.6)% 1.2% (1.3)%
---------------- ----------- ----------- ----------- ---------- ---------
Asia (8.9)% (6.4)% (2.5)% (0.5)% (1.9)%
---------------- ----------- ----------- ----------- ---------- ---------
Europe (6.9)% (10.3)% (8.6)% (5.0)% (7.2)%
---------------- ----------- ----------- ----------- ---------- ---------
International (8.0)% (8.3)% (5.5)% (2.9)% (4.6)%
---------------- ----------- ----------- ----------- ---------- ---------
Tesco Bank 3.6% 5.8% 2.7% 3.8% 3.0%
---------------- ----------- ----------- ----------- ---------- ---------
Group (3.8)% (4.9)% (3.5)% (0.2)% (2.3)%
---------------- ----------- ----------- ----------- ---------- ---------
Notes:
These results have been reported on a continuing operations
basis and exclude the results from our operations in China.
Like-for-like sales growth is reported at constant exchange
rates. All other figures quoted are at actual exchange rates,
including VAT and excluding fuel unless otherwise stated.
For UK and ROI, these results are for the 19 weeks for both the
current year and the previous year comparison, for the period ended
3 January 2015 and 4 January 2014 respectively; the 3rd Quarter
results are for 91 days for both the current year and the previous
year comparison, for the periods ended 22 November 2014 and 23
November 2013 respectively. The Christmas period results are for
six weeks for both the current and the previous year comparison,
for the periods ended 3 January 2015 and 4 January 2014
respectively.
For Tesco Bank and India, these results are for the 19 weeks for
both the current year and the previous year comparison, for the
period ended 7 January 2015 and 7 January 2014 respectively; the
3rd Quarter results are for 91 days for both the current year and
the previous year comparison, for the periods ended 30 November
2014 and 30 November 2013 respectively. The Christmas period
results are for the month of December and one additional week for
both the current year and the previous year comparison, for the
period ended 7 January 2015 and 7 January 2014 respectively.
For all other countries, these results are for both the current
year and the previous year comparison, for the period ended 4
January 2015 and 5 January 2014 respectively; the 3rd Quarter
results are for 91 days for both the current year and the previous
year comparison, for the periods ended 23 November 2014 and 24
November 2013 respectively. The Christmas period results are for
six weeks for both the current year and the previous year
comparison, for the period ended 4 January 2015 and 5 January 2014
respectively.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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