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UK Insights

Tesco Q3 results

Claire Davies

Former editor and head of content

Business Retail 04.12.2013 / 11:50

Tesco logo

Kantar looks at the Tesco Q3 2013 results announcement

Tesco has announced that UK like-for-like sales, excluding both VAT and petrol, decreased by 1.5% for quarter three (Q3 2013).Tesco says these results are due to 'continuing pressures on UK household finances' making the grocery market 'more challenging for everyone since the summer'

Bryan Roberts, director of retail insights at Kantar Retail says:  "Ongoing flaccidity in Tesco's like-for-like sales occurs against the backdrop of significant investments being ploughed into store remodels, multichannel and revamped private label lines. This is placing pressure on Tesco's treasured 5.2% operating margin, calling into question the wisdom of protecting margin while the business is struggling to keep pace with a strong competitive set in a sluggish UK market. This situation has seen some observers call for Tesco to adopt the much-vaunted 'nuclear' option on pricing, an investment of margin into an aggressive price repositioning that would theoretically plunge price-matching rivals into turmoil, slashing their cash flow and profits. While this is certainly one option, we believe that the recent past shows us that value is so much more than price. While the disruptive nature of severe price investment might be tempting, our view would be that further investment in innovation, in-store experience, quality and service is the correct course of action in order to lay the foundations for sustainable long-term recovery."

And Melanie Puddick, Brand Director from Kantar company, Added Value agrees: "Historically Tesco's point of difference has been on cost reduction, but the competition has caught up with it. Tesco may want to re-evaluate their value equation for customers, with the underlying principle that value today includes emotional value (desire for the best you can afford) and not simply the cheapest price. There is a clear opportunity to review their approach to both in-store experience and their own brand ranges to deliver value that is both more aspirational and good for the consumers' pocket."

Source : Kantar, Kantar Retail, Kantar Added Value

Editor's Notes

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