Sales slump at Tesco and Argos

Published on: 12th January 2012

Tesco and Argos have announced bleak trading figures as sales tumbled during the Christmas period.

Tesco has taken the unprecedented step of issuing a profit warning – its first in living memory. Argos, meanwhile said it anticipated a significant cut in its full year dividend and would be closing some of its stores.

Tesco said sales at British shops open over a year dropped 2.3%, excluding fuel and VAT sales tax, in the six weeks to January 7, instead of the 0.9% fall that had been projected.

“It is not what I wanted for Christmas,” said chief executive Phil Clarke, adding sales were hit by weak consumer spending, a muted response to price cuts the group made in September and deep promotions by rivals.

Sales at catalogue-based Argos stores open over a year fell 8.8 percent in the 18 weeks to December 31, which includes its third quarter sales period. The drop compares with a second quarter fall of 8.6%.

Argos said the trading environment had been both “volatile and demanding” with intense competition from supermarkets, specialists and Internet players and its predominantly low-income customers facing the most severe squeeze on their budgets.

Back at Tesco, Phil Clarke said trading profit in 2012/13 would be flat, compared with forecasts for a 10% rise, as Tesco invested hundreds of millions of pounds lowering prices, expanding its online business and improving customer service.

Focus has now shifted to what measures Tesco will use to counteract its worst Christmas trading for decades, with a promotional price war mooted by City analysts.


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