Downturn hits Tesco sales growth
Updated on 02 December 2008
Tesco has revealed a 2 per cent rise in third-quarter UK sales, its lowest growth since the early 1990s.
The retailer was expected to announce a sharp drop in profits, after recent figures revealed shoppers were switching to discount rivals such as Asda and Morrison at record rates.
As retailers struggle with the economic downturn, Tesco, which employs 440,000 people in about 4,000 stores across 14 countries, said it will cope by cutting an extra £90 million of costs this financial year to take total planned savings to £540 million.
It will also restrict capital spending to less than £4 billion next year from around £4.5 billion this year and ask suppliers to "play their part,".
Tesco, the world's third-biggest retailer behind US group Wal-Mart and France's Carrefour, said UK like-for-like sales excluding fuel rose 2.0 per cent in the 13 weeks to November 22.
That was down from 4.0 per cent in the second quarter and the slowest growth for any reporting period since the group's annual results for 1992-93, though it is only in recent years that it has posted quarterly numbers and a sales figure excluding fuel.
Despite this, Tesco said new "discounter" products had drawn an extra 300,000 customers a week to its stores.
Group sales rose 11.7 per cent in the third quarter, including a 28.1 per cent rise in its international businesses which was driven by new store openings and currency moves.
Tesco said in a statement: "By giving customers more affordable choices, we have deflated our sales during the quarter by between two and three percentage points."
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