UK Consumer Is Trading Down, But Tesco Profits Goes Upff

Source: Sky UK

The world’s third-biggest retailer, behind France’s Carrefour and US group Wal-Mart, said like-for-like sales excluding fuel rose 4.0% in Britain in its second quarter.

This was up from 3.5 percent in the first quarter.

Chief Executive Terry Leahy said: “We’ve seen the economic pressure being felt by our customers for more than 12 months and it’s not getting any easier.”

”The pattern is pretty clearly set that customers feel hard up and they want to save money. So that’s the environment in which we’re trading and in which we’ve produced these very good set of results.”

Britain’s middle classes were trading down, he conceded, “but they are doing it in our own stores”.

”We launched a new discounter range and the growth in that range is actually faster than Aldi or Lidl... but it’s within the body of our stores.”

Mr. Leahy said that Britain’s food inflation had passed its peak, creating room for interest rate cuts.

”We also need the banks to get back to doing their jobs, which is to lend money to the real economy so that it can continue to invest and grow.”

According to researchers, Tesco has been losing UK market share to rivals more closely associated with low prices, like Asda and Morrison, Aldi and Lidl.

But Tesco, which still has a British market share of more than 30%, is fighting back with a new low-cost range of products.

Tesco shares rose 0.8% to 373 pence in early trading on the London Stock Exchange.