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The supermarket has still reported an increase in profits of 12.1% however on the back of “strong growth” in both Europe and Asia. They cited “subdued demand” in the UK as the cause for the fall in like-for-like sales.
Supermarkets are traditionally the very last of the retailers to see a fall in sales, so independents are right to heed this as a warning that tough times remain ahead.
Sainsbury’s results relatively strong
0.5% – fall in like for like sales at Tesco
However, it’s not all bad news as many analysts see the trend towards smaller c-stores as one of the contributing factors eating into supermarket margins.
Independent retailers are uniquely placed to adapt to a tough market, whereas the multiples’ smaller format stores are bound by their bigger brothers.
Sainsbury’s showed strong adaptiveness in the market with an increase of 1.5% like-for-like sales, also indicating that the market may not be as tough as Tesco’s figures suggest. Sainsbury’s Chief Executive described the results as “a good sales performance in a tough consumer environment.”
Big Price Drop
Tesco have been fighting hard for shoppers in recent weeks with their high-profile Big Price Drop promising to reduce the prices of over 3,000 “everyday” products.
A Guardian journalist analysed his shopping from the 12th September and found that the big price drop meant an increase of £2.09 on his grocery bill – apparently Parma ham and Innocent smoothies aren’t everyday essentials!
While Co-op chief executive Peter Marks believes people are cutting back on food for the first time in his working life, Tesco’s poor results also highlight the fact that 20% of the chains UK sales come from “discretionary” items – or in other words, electricals, CDs/DVDs, clothes and books.
These non-essential items are one thing that shoppers are cutting back on in their droves, and this is therefore another solace for the independent c-store owner selling the top-up essentials that customers are very much still relying on. Updated: 5th October, 13:43
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