Analysts at Citi forecast that the grocery giant will deliver like-for-like sales growth of between 4 and 4.5 per cent for the 6 weeks to January 5. According to this week’s TNS Worldpanel figures, Tesco’s growth over Christmas was broadly in line with Sainsbury’s and Asda’s, although the figures singled out Morrisons – with a reported barnstorming performance – as the clear Christmas winner.
Non-food will be one of the key indicators that many City number crunchers will be poring over next week for evidence that Tesco is being adversely affected by the general malaise hitting the UK retail sector.
Investors are right to be nervous, given that non-food makes up 22 per cent of Tesco’s UK sales and price deflation continues to run riot. This week, Sainsbury’s chief executive Justin King said that its price deflation on overall non-food was running at between 8 and 10 per cent, but for all electricals retailers it is significantly higher.
This week, Retail Week learned that Tesco’s total clothing sales are growing at a rate in excess of 5 per cent. While its like-for-like clothing sales are understood to have slowed late last year, they were still in positive like-for-like territory over Christmas.
Many fashion retailers would give their right arm for these figures at the moment. And this week, Tesco told Retail Week about its plans to become the world’s second-biggest retailer of Fairtrade cotton this spring and the ramping up of its organic cotton clothing offer.
On the prospects for Tesco’s overall non-food sales, Citi analyst James Anstead said: “Last September, the chief executive’s [Sir Terry Leahy] robust comments on non-food sent the shares soaring – we do not rule out history repeating itself next week.”
Tesco’s non-food sales may have slowed from their previous juggernaut, but the only certain thing about the grocer’s share of the overall non-food market is that it will grow.
According to a report by IGD this week, supermarket sales of non-food products in the UK will grow twice as fast as the supermarket sector as a whole over the next five years, with overall sales rising from£10.4 billion this year to£14.8 billion in 2012.
Given Sainsbury’s performance and bullish reports about Asda and particularly Morrisons, Tesco is unlikely to provide anything but a much-needed shot in the arm for the UK retail sector next week.
However, its continued onslaught in non-food is anything but good news for other UK general merchandise retailers – including catalogue giant Argos’ business, variety chain Woolworths and hardware retailer Robert Dyas – along with value fashion, furniture, homewares and electricals retailers.
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