Tesco’s online sales in the UK have dropped by 14.5% compared with a year ago, today’s trading statement shows.
Sales at large stores are down slightly, while takings at convenience store are up 6.2%, as the relaxing of pandemic restrictions sees more people return to work, and less demand for home deliveries.
Here’s Steve Dresser, CEO of Grocery Insights, with early reaction:
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
Customers are facing “unprecedented increases in the cost of living” as rising prices hammer households.
That’s the verdict from Tesco this morning, the day after the Bank of England warned that inflation will hit 11% this October, in the worst squeeze on households in decades.
Ken Murphy, Tesco’s chief executive, warns that the market environment “remains incredibly challenging”, with signs that customers are changing their shopping behaviour as inflation bites.
The UK’s largest supermarket chain has reported that its underlying UK sales dropped by 1.5% in the three months to 28th May (excluding fuel sales and VAT). That’s compared with a year ago when the pandemic lockdown boosted demand for grocery.
Although difficult to separate from the significant impact of lapping last year’s lockdowns, we are seeing some early indications of changing customer behaviour as a result of the inflationary environment.
Customers are facing unprecedented increases in the cost of living and it is therefore even more important that we work with our supplier partners to mitigate as much inflation as possible.”
Tesco is also sticking to its profit forecasts, and says it has grown market share over the quarter against rivals.
Like-for-like sales fell 2.4% in the Republic of Ireland over the quarter.
As Tesco has over a quarter of Britain’s grocery market, it has a very good view of the state of the economy.
And Murphy’s concerns come just a day after a report warned that food price rises in the UK could hit 15% this summer – the highest level in more than 20 years, with meat, cereals, dairy, fruit and vegetables are likely to be the worst affected.
Anothe survey has found that more Britons are now skipping meals or using a food bank, due to rising inflation.
Also coming up today
Recession fears are gripping markets, after a raft of rate hikes this week from the Federal Reserve – its biggest in 28 years, the Swiss National Bank (unexpectedly), and the Bank of England to get a grip on inflation.
Stocks slumped yesterday, with London’s FTSE 100 racking up its worst fall in three months (down over 3%), as the blue-chip index fell to its lowest since March.
Wall Street was hammered again, wiping another 3.25% off the benchmark S&P 500 index.
Shares in Asia are now sliding today, on worries that these tighter monetary policies from central banks could undercut a global economic recovery. Japan’s Nikkei is down 1.5%, while Australia’s main index has shed almost 2%,
The outlook is worsened by the likelihood of the conflict in Ukraine dragging on and the west’s economic war on Russia leading to even higher energy prices ahead of the northern hemisphere winter.
“The speed and degree of policy tightening may prove too much for economies to handle, particularly given the commodity price shock currently in play,” economists at NAB bank in Australia said in a note on Friday.
“As a result, recession risk for several of the major advanced economies, including the US, is uncomfortably high.”
David Bassanese, chief economist of Betashares in Sydney, went further and predicted a US recession “within the next 12 months” due to persistent inflation and the Fed’s pledge to raise rates until the inflation genie is back in the bottle.
European stocks are expected to open higher today after Thursday’s rout.
- 10am BST: Eurozone inflation rate for May (final estimate)
- 1.45pm BST: Federal Reserve chair Jerome Powell speaks at the Inaugural Conference on the International Roles of the U.S. Dollar
- 2.15pm BST: US industrial production for May