Sir Terry Leahy today hailed the “tailwinds of recovery” as Tesco unveiled its interim results.
If you hadn’t noticed a warm breeze buoying your every step in recent months, it could be because Sir Terry was taking about Asia.
To the surprise of nobody, Tesco today confirmed that international was driving its growth. There are plenty of highlights, with overall profits up 9% to just shy of £1.7bn.
Tesco even predicted that Fresh & Easy would start making money, rather than continue to haemorrhage it, by 2013. (If that date seems a long way off, consider that its US venture cost Tesco £95m in the past six months – itself representing a double-digit drop in losses on the year before.)
Despite its long-established dominance of a grocery market that Sir Terry called “subdued”, Tesco will surely be concerned at just how flat its UK sales have been.
Like-for-likes up just 0.3% show the retailer is, at best, struggling to find that customary extra gear. Those figures will be given greater context when Sainsbury’s issues its latest trading update tomorrow.
More specifically, consultancy Verdict points to “an apparent loss of traction in non-food”.
“As the largest grocer in both sales and space terms, it is becoming increasingly difficult for Tesco to eke out incremental growth from the UK market,” argues analyst Neil Saunders.
“After a good performance last year, non-food seems to have slipped back significantly. [Despite] the economic slowdown, it remains Tesco’s biggest growth opportunity and an improved performance will be necessary to drive the business forward in the next few years.”
Certainly the scope is there in services, with Tesco Bank upping its revenues by 12% in the latest numbers.
Yet with shares in the retail giant dipping by a couple of pence in the wake of today’s results, investors are clearly concerned that Philip Clarke may take the helm and find not a tailwind at his back but an icy blast of reality.
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