Tesco halts sales slide but is outperformed by Sainsbury's

Sainsbury’s has outperformed Tesco in the last six months, according to the latest financial results from the two supermarkets.

Tesco posted its first fall in profits for 18 years. Its pre-tax profit fell to £1.7 billion, down 11.6 per cent from the same period last year.

It still saw sales rise as it sold £32.3 billion worth of goods excluding VAT in the 26 weeks to August 25th, up 1.6 per cent on the same period last year.

Sainsbury’s total sales for the last six months were up four per cent and like-for-like sales grew by 1.7 per cent. Sales grew by 1.9 per cent in the quarter.

Tesco saw a 0.1 per cent rise in sales in the second quarter, reversing a 1.5 per cent sales fall in the first quarter.

Mr Clarke said: "Customer perceptions of service, quality and availability have begun to show some early signs of improvement.

"Our first target is to be performing in line with the industry in like-for-like terms."

Tesco’s fall in profits was partly due to a £1 billion investment programme to revamp UK stores after the disappointing results seen in the last quarter of 2011 and the first quarter of 2012 that saw Tesco chief executive, Philip Clarke, issue its first profit warning in 20 years.

In the last six months Tesco has recruited 8,000 extra staff at its 3,000 UK stores, mainly focusing on customer service. Many stores have also undergone a revamp.

Mr Clarke believes the £1 billion investment has been partly vindicated as it reversed the sales decline.

Sainsbury’s saw like-for-like sales growth (which excludes sales in new stores) of just 0.1 per cent excluding fuel, in the three months to August 25th. This was the first rise for seven quarters.

Mr Clarke said that sales of Tesco’s Everyday Value range were growing as customers continued to feel the squeeze.

Mr Clarke said: “We are planning on the basis that the global economic environment continues to be very challenging, with customers facing real financial pressures and our businesses bearing the burden of higher costs.”

Tesco also saw disappointing sales globally with profits down by 17.1 per cent to £378 million over the past six months.

Meanwhile, Sainsbury’s continues to eat into Tesco’s market share with like-for-like sales excluding fuel growing by 1.9 per cent in the three months to September 29th.

Justin King, Chief Executive, said: "This has been a unique and special summer, during which we have delivered another quarter of good sales, outperforming the market in what remains a challenging retail environment. Our total sales are up 4.3 per cent, and like-for-like sales up 1.9 per cent.

"Our own label penetration is increasing at a faster rate than any of the major supermarkets; a testament to the investment we have made in the quality of our products."