Shares in Tesco (LON:TSCO) plunged today as the supermarket giant issued a profit warning alongside one of its worst Christmas performances in living memory.
Like-for-like sales in its core UK market fell by 2.3% in the six weeks to 7 January excluding VAT and petrol and by 1.3% including VAT.
Chief executive Philip Clarke said he was “disappointed” with the performance, which undershot even the most pessimistic broker forecast ahead of the update.
Clarke admitted the group had been outsmarted in the run-up to Christmas by its rivals, which had stepped up their promotional activity ahead of the holiday period.
Tesco added to the gloom by warning it expected profits to stay flat in the current year, stating it had seen more “strain than anticipated” over the Christmas period.
“As a result, while underlying profit before tax and earnings per share for 2011/12 will be broadly in line with market consensus forecasts, we expect group trading profit growth to be around the low end of the current consensus range,” Clarke said.
“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” he added.
In the UK, total sales including VAT and petrol grew by 3.8% and by 1.7% excluding petrol. Net new space contributed 3.0% growth, but overall Tesco said the UK performance was below expectations and disappointing, particularly in the context of the difficult weather conditions in 2010.
Total international sales over the period grew by 8.2% and by 1.4% like-for-like excluding petrol. US arm Fresh & Easy grew like-for-like sales by 19.3%, though Asia only saw modest progress due to the flood problems in Thailand.
Share in Tesco fell by 15% to 326p.