Tesco Christmas Sales Decline as Shoppers Turn to Discounters

Tesco Plc, the largest U.K. retailer, reported weaker holiday sales as more shoppers turned to discounters and upscale rivals for their Christmas provisions.

U.K. same-store sales fell 2.4 percent, excluding gasoline and value-added tax, in the six weeks ended Jan. 4, Cheshunt, England-based Tesco said today in a statement. The median of 13 estimates in a Bloomberg News survey was for a 2.2 percent drop.

Tesco lost about 1 percentage point in market share last year as discounters Aldi and Lidl and the upscale Waitrose chain gained at the expense of traditional supermarkets. A 1 billion-pound ($1.7 billion) investment in staff, shop revamps and price promotions has failed to restore growth at home, while shoppers from Dublin to Bangkok are also defecting to cheaper rivals.

“These results were driven primarily by a weaker grocery market,” Tesco said in the statement. Full-year earnings should be within the current range of estimates, it also said.

Tesco’s declines contrast with Christmas gains reported by Lidl and Waitrose. Lidl this week reported its best U.K. performance to date over the Christmas period with “huge” increases in sales of premium own-label Deluxe products. Waitrose said it had a record Christmas period with same-store sales up 3.1 percent in the five weeks to Dec. 24.

More than half the country shopped at Aldi or Lidl in the run-up to Christmas, researcher Kantar Worldpanel said, as the discounters sought to take on Tesco’s premium Finest range.

Aldi, Lidl

Tesco isn’t alone in being squeezed by the expansion of Aldi and Lidl, both of which are stepping up U.K. store openings as hard-pressed Britons seek to cut their grocery bills.

Competitor J Sainsbury Plc yesterday lowered its full-year sales outlook, while William Morrison Supermarkets Plc said today that profit will be toward the low end of estimates.

In Europe, sales at Tesco outlets open at least year fell 1.6 percent in the six-week period, the grocer said today, while in Asia same-store sales declined 5.9 percent.

Tesco exited the U.S. last year and scaled down its investments in China.

Tesco shares fell 1 percent to 328.3 pence in London yesterday, extending their decline to 13 percent since the stock rose to a near four-month high on Sept. 18.

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