What’s Going On Here?

Tesco (UK’s 100-year-old largest retailer), reported weaker-than-expected sales growth thanks to a rotten grocery market.

What Does This Mean?

• Tesco’s
  • UK sales grew only 0.4% last quarter (down from 1.7% in the previous one).
  • Sales in central Europe fell by 5%.
• Tesco (like other retailers) pointed to the weather: an unseasonably cold May and the previous hottest-since-records May was a tough comparison for sales of beer and ice cream.
• While Tesco remains the undisputed king of the British grocery market, its claims to have grown faster than rivals last quarter are questionable. Competition is heating up: Morrisons (UK’s number-four grocer), announced plans to expand its same-day home delivery partnership with Amazon…

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 being cautious.
• The UK’s big four grocers are all still losing market share to
  • German Krämers Aldi and Lidl (not satisfied with its US expansion), announced big plans for London on Wednesday.
  • Iceland – the cut-price frozen food specialist – is also opening 50 new UK stores.
• Sainsbury’s (3rd largest chain of supermarkets in UK) 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.

French grocer Casino said that it would sell its shares 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, discarding excess baggage in order to pay down its debt.

Content source: Finimize. (2019) Tesco Eats It. Available from: https://www.finimize.com/wp/news/tesco-eats-it/ [Accessed 21 June 2019]