Big Price Drop could further dent Tesco sales

By Dan Colombini

- Last updated on GMT

Related tags Retailing Better Tesco uk Tesco

Tesco has reported an entire year of declining sales despite its £500M price-cutting initiative
Tesco has reported an entire year of declining sales despite its £500M price-cutting initiative
An over-reliance on The Big Price Drop initiative could cut Tesco’s future revenues, city analysts have warned.

Following the retail giant's third quarterly results for the period ending November 26, experts questioned whether Tesco would be able to maintain volume-based revenues if it depended upon The Big Price Drop alone.

Clive Black, an analyst at Shore Capital, said: “Tesco UK is replacing price-based sales growth with revenues that are more volume-based in demonstrably challenging markets and times. Such volumes should have beneficial implications for gross margins and/or working capital for the core chain if they are sustained.

“We should add, though, that we question whether or not volumes will be sustained if Tesco UK depends upon The Big Price Drop alone.​”

Improving ranges

Ceo, Philip Clarke highlighted a need for the retail giant to improve its performance with a focus on improving ranges, services and store experience.

Tesco today reported an entire year of declining sales despite its £500M price-cutting campaign.

Like-for-like sales, excluding petrol and sales tax at Tesco’s UK retail business, which accounts for over 60% of trading profits, fell by 0.9% for the period. The third-quarter decline follows a similar decline in the previous quarter and a 0.1% drop for the first part of the year.

Clarke said: “In the UK, our increased investment in the shopping trip for customers is starting to deliver. The Big Price Drop campaign, now in its second phase, has lowered prices significantly for hard-pressed families and we are now being rewarded with stronger food volume growth.

“We are also seeing positive customer reaction to the improvements in our general merchandise ranges. Whilst I am pleased with these early signs of stronger performance, a great deal more remains to be done and we are confident of delivering further improvements as we implement our plans​.”

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