Tesco set to reveal worst sales figures for 20 years

TESCO, Britain's largest retailer, is set to reveal this week that it has suffered its worst six-month sales period for 20 years as UK customers, hit by the recession, cut back on their shopping and/or swap to discount supermarkets such as Lidl and Aldi.

Analysts expect the supermarket chain to report a drop of nearly one per cent in underlying UK sales for the six months to the end of August. More seriously, the speed of decline has been increasing in recent weeks. Estimates for the last three months are for a fall of up to two per cent.

One problem is that Tesco makes 20 per cent of its UK sales in "discretionary" items such as clothes, electrical goods, books and DVDs. It is in these areas that cash-strapped customers have been mainly cutting down.

To lure customers back, Tesco's new chief executive, Philip Clarke has pledged to cut prices by between 10 per cent and 30 per cent on more than 3,000 products. James Collins of Deutsche Bank is among analysts who fear the "price drop" campaign could trigger another supermarket price war.

Tesco declined to comment on the analysts' forecasts. A spokesman said: "This is a very successful company. The UK is not at its healthiest."

Because the company operates in 14 countries, and the sales performance has been strong in many overseas stores, Tesco should still increase its overall trading profit by seven per cent to £1.81bn for the first half.

Read a full report at the Guardian. ·