Tesco Plc’ share price up, posts a decline in first-quarter sales, faces price war with discount chains

Tesco Plc, the largest grocery chain in the U.K., announced a 3.7% decline in its sales over the first financial quarter of the year. The announcement comes at a time when the company is facing a fierce price competition with discount rivals.

The Chief Executive Officer of Tesco Plc – Mr. Philip Clarke said in the statement, which was cited by the Financial Times: “As expected, the acceleration of our plans is impacting our near-term sales performance. The first quarter has also seen a continuation of the challenging consumer trends in the UK, reflecting still subdued levels of spending in addition to the more structural changes taking place across the retail industry. On price, the entire market has seen a step-down in growth since the end of last year largely driven by lower inflation.”

According to the statement made by the company, its comparable sales in the U.K. excluding gasoline over the quarter ended May 24 declined by 3.7%. However, the result is better than the 4% decrease that analysts projected. Tesco Plc also announced that its international sales fell by 8%, and it posted a 3.2% drop in its group sales.

Mr. Philip Clarke, who has been occupying the position of Chief Executive Officer of the company for three years now, did not manage to put an end to the market share decline of Tesco Plc. The decline is a result of the fact that some customers have left the company choosing other grocery chains such as Lidl and Aldi, which offer them lower prices. Other customers, on the other hand, have chosen luxury chain such as Waitrose.

One of the analysts working for Exane BNP Paribas – Mr. Andrew Gwynn commented on the companys results for Bloomberg, saying: “It’s not as bad as some feared, so you should see some relief. International is hardly strong either, but again not as weak as some feared.”

Tesco Plc added 0.91% to trade at 300.20 pence per share by 8:47 GMT, marking a one year change of -17.63%. According to the information published on the Financial Times, the 18 analysts offering 12-month price targets for Tesco Plc have a median target of 291.00, with a high estimate of 360.00 and a low estimate of 230.00. The median estimate represents a -2.18% decrease from the last price of 297.50.