Sainsbury’s chief executive Justin King said the consumer environment is the toughest it’s been in his 28-year retail career, and warned that rising petrol prices are “punching a hole in customers’ budgets”

Tesco’s global growth

Tesco’s international operation held up in its first quarter with like-for-likes excluding petrol up 2.8%.

Asia reported sales up 8.6%, and like-for-likes up 3.2%. Thailand was the outstanding market with like-for-likes up 8%. South Korea reported more subdued sales, with like-for-likes up 1.2%. Neville-Rolfe said South Korea has suffered from foot and mouth, and the fallout from the Japanese earthquake. Tesco’s Japan business is still suffering, reporting like-for-likes down 6.4%.

In the US, its Fresh & Easy business reported sales up 21.9%, and like-for-likes up 11.1%. Neville-Rolfe said its new stores in northern California have started strongly.

King said consumer confidence has been “bumping along the bottom” for three years. He said petrol is taking about £5 off customers’ weekly shopping budgets compared with last year.

Sainsbury’s this week reported like-for-like sales in its first quarter for the 12 weeks to June 11 up 4.8%, or 1.9% excluding petrol, and 0.9% excluding petrol and VAT. Tesco this week reported like-for-like sales for its first quarter for the 13 weeks to May 28 up 3.4%, or 1% excluding petrol, and down 0.1% excluding petrol and VAT.

Both grocers said non-food had a tough quarter. Tesco executive director Lucy Neville-Rolfe said non-food like-for-likes were down just less than 5% but said they were “slightly better than the previous quarter”.

She said: “Electricals was challenging, but clothing has started to perform a bit better.” She said Tesco is reviewing the way it merchandises its electricals and entertainment areas in stores, in a bid to lift sales.

King said non-food is growing faster than food, but it is no longer growing at three times the rate of food as previously. He said Sainsbury’s, which is less exposed to non-food than Tesco, also found electricals challenging but it was “up against sales for the World Cup last year so it’s difficult to compare”.

However, King said Sainsbury’s non-food sales are outperforming the market, “with clothing and home doing particularly well”.

  • Tesco has launched ‘Speak or Scan’ on its Android app, which lets shoppers search for products using the barcode scanner or speak the product name. It follows the trial of Tesco’s in-store sat-nav app.