Tesco is being forced to budget for weaker sales growth in the UK due to imminent recession facing the economy, City analysts have revealed.
Following meetings between Tesco’s senior management figures and analysts at Shore Capital, it emerged that the supermarket giant is internally budgeting for like-for-like sales growth of about 2 per cent in the UK, compared to its usual guidance of 3-4 per cent.
Shore Capital’s Clive Black said: “Tesco has been budgeting for its business to do 3-4 per cent like-for-likes (same store sales) in the UK for many years, certainly for most of this decade. I can’t remember the last time the budget was less than that.”
“Such budgeting is a significant change…and indicates the seriousness of the economic slowdown and its likely duration.”
“It would be no surprise to us if the recent financial turmoil has materially impacted consumer sentiment and sales for a short period at least,” Black added.
Only last month, Tesco chief executive Sir Terry Leahy said that it was “perfectly possible” for the retailer to deliver its usual UK sales growth levels, despite the economic turmoil which has hit consumer confidence.
Mr Black said Tesco is “cutting its cloth” to adapt to tougher trading conditions.
Earlier this week, the UK’s largest retailer asked all of its non-food suppliers to wait an extra 30 days for payment in the run-up to Christmas, and is also reportedly looking to reduce its labour and distribution costs.
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