Tesco shares tumble by 15% on poor Christmas trading results

Thursday, 12 January 2012 03:22

Tesco shares fell by 15 per cent today after the supermarket giant issued a profits warning on the back of disappointing Christmas trading results in the UK.

Tesco announced that it plans to reduce the amount of new stores it will open and focus more on online sales. Shifting the focus to growth in non-food sales will reduce the supermarket’s reliance on store sales and allow them to focus on online sales.

The share price opened at 385 pence per share but by 3pm the price had fallen to 328.5 pence per share. The fall wiped almost £5 billion from its market capitalisation value.
Philip Clarke, Tesco chief executive, said: “We are disappointed with our seasonal trading performance in the UK.

“The Big Price Drop is an important first element in this process but there is much more we can do to further improve our shopping trip for customers and we are determined to move faster.”

Tesco lagged behind both Morrisons and Sainsbury’s in their Christmas trading. Tesco sales in the six weeks to January 7th fell by 2.3 per cent compared to last year on a like-for-like basis, which strips out sales in stores opened in the last year, VAT and fuel sales. Analysts had expected a fall of 0.9 per cent.

Graham Spooner, investment research analyst at The Share Centre said: “Tesco attempted to win and retain customers in these troubled times by introducing its ‘Price Drop’ campaign, however as suspected this resulted in limited revenue growth.

 “Morrisons, which outperformed the main supermarkets in 2011, continues to gain market share from its main rivals. Tesco is struggling to get ahead in this increasingly competitive market.

Tesco said that it now expects to see little growth in trading profit in its next financial year, although profit and earnings per share should be broadly in line with market expectations this year.

Tesco plans for international expansion could be affected by a lack of profit from its core operations in the UK.

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