Tesco boss Philip Clarke today described some of the activities of the discounters as “uneconomic” and said the UK’s biggest retailer would not resort to short-term fixes on price, despite falling sales.
Clarke is under pressure to launch a price war after revealing Tesco Q3 sales fell on a like-for-like basis by 1.5% in the third quarter. With inflation factored in, the company admitted UK volumes were down 3-4%. He said Tesco was “resolutely determined” to stick to its UK turnaround strategy, although he admitted it had been caught out by the extent of the post-summer slowdown.
“The discounters are opening lots of new stores,” Clarke said today. “Well done them. If I did the same, it’s not a plan that would deliver long-term growth.”
“We need to move faster. We can’t do enough stores fast enough”
Phil Clarke
Clarke described some of the couponing activity of discounter Aldi as “uneconomic” and, having come under growing pressure from some analysts to launch a major fight back on price, said there would be “no quick fixes.”
However, Clarke admitted Tesco needed to “move faster” in its UK turnaround plans, as he acknowledged that revamps of its larger stores, including the rollout of its Giraffe restaurant chain and Harris+ Hoole bakeries, were taking a long time to implement.
“Our biggest opportunity is the largest stores,” said Clarke, who said stores such as Watford, Coventry and Purley were continuing to outstrip those which have yet to be converted. “We need to move faster. We can’t do enough stores fast enough. We bought Giraffe 18 months ago and we have just done out the second one in-store.
“Harris+Hoole: we bought that two years ago and we’ve just opened our seventh. These plans do take time.”
Declining incomes
Clarke said Tesco was “feeling a double impact” because of its slowdown in store openings, combined with the limping economy.
Tesco described the current climate as an “unprecedented period of declining real incomes and a higher cost of living” and said it had a direct impact on its Q3 results, which come 18 months after it announced plans to turn around the UK business.
“We’re in the middle of a big transformation plans and we’re in the middle of a very tough situation in the market,” admitted Clarke.
“The one thing we didn’t expect was that the market would go backwards and when the market goes backwards, Tesco goes backwards.”
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