Tesco has reported its worst Christmas sales performance in decades as UK like-for-likes excluding VAT and petrol declined 2.3%.
Tesco said the performance was below its expectations and “disappointing, particularly in the context of the difficult weather conditions in 2010”.
The UK’s biggest retailer said that while underlying pretax profit for the year will be broadly in line with market consensus forecasts, it expects group trading profit growth to be “around the low end of the current consensus range”.
The retailer said: “In a challenging consumer environment at home, and with early signs of more cautious behaviour emerging elsewhere, we have seen more strain than anticipated on our profitability during the important seasonal trading period.
“Our plan for 2012/13 now reflects substantially increased investment to deliver an even better shopping trip for customers - particularly in the UK. Consequently, we anticipate minimal Group trading profit growth for the year.”
Tesco chief executive Philip Clarke said: “In a challenging economic environment, we made good progress internationally but despite record sales, we are disappointed with our seasonal trading performance in the UK.
“We will continue the process of change that we started nine months ago to address long-standing business issues, building on the important steps we have already taken in the United States, in Japan and at Tesco Bank, as well as those we have begun to take in the UK.
“The Big Price Drop is an important first element in this process but there is much more we can do to further improve our shopping trip for customers and we are determined to move faster.”
In UK general merchandise Tesco saw “good growth overall” in clothing and electricals, with strong sales in tablets and e-readers.
Online sales “were strong in both food and non-food”, growing 14% overall.
Total international sales grew 8.2%, and 5.0% at actual exchange rates. Its three regions, Asia, Europe and the US, all performed well, Tesco said.
Panmure Gordon analyst Philip Dorgan said: “We know that improvement will take time to come through, but there doesn’t appear to be any sign of any forward momentum. We can acknowledge the deflationary impact of Price Drop, but surely there should be a volume benefit coming through by now.”
Shore Capital analyst Clive Black said: “Whilst today’s update is a major disappointment, the downgrades reflect not just poor recent trading but a build up of matters, particularly in the core chain.”