There’ll be extra muffins at Tesco Towers in Cheshunt this morning as the UK’s biggest retailer posted a 1.8 per cent sales gain in the six weeks to January 5, including the key Christmas period.
The figures flatter somewhat as they compare with a disastrous 2.3 per cent sales decline in the same period last year, numbers which prompted a profit warning and led to speculation about the future of Tesco’s newly-appointed CEO Philip Clarke (left). But an improvement is an improvement and Clarke can now make a credible case that his decision to pump an extra £1bn into sprucing up the UK stores’ offer (by having enough staff for a start) is beginning to pay off. We wait to see what effect this will have on profits as opposed to sales.
There will also be modest celebrations at Tesco’s new ad agency Wieden+Kennedy as the sales lift appears to vindicate its rapid fire Christmas campaign, loads of short ads highlighting different aspects of Tesco’s offer. Spending-wise this was anything but cheap and cheerful as Tesco actually outspent most of its rivals. Of these discounter Aldi performed the strongest, with Christmas sales up an impressive 30 per cent (on a much smaller base than most of the rest).
Clarke and Tesco aren’t out of the woods yet, of course. With inflation running at 2.7 per cent in the UK and likely to go higher as energy bills bite all the big grocers (Tesco, Walmart-owned Asda, Sainsbury’s and Morrisons) are actually getting smaller in real terms. Also online sales are key to most of the growth the grocers are showing (with the exception of Morrisons which doesn’t yet have online) and this is barely profitable at best.
But Tesco, which also appointed insider Chris Bush as UK managing director today freeing up Clarke to take the axe to Tesco’s Fresh & Easy disaster in the US, is at least heading in the right direction. What Clarke needs now is the stuttering UK economy to show some signs of growth, but he may be disappointed.
As for W+K its ‘real’ brand advertising is said to be slated for the spring.