‘Bad day’ for grocery sector as Tesco results stun the market

Analyst Dave McCarthy at Evolution said: “This is a bad day for Tesco and for the sector.

“We suspect that when investors look back, they will view this day as the day the market recognised the fundamental changes that are taking and have taken place.

“Today is Tesco Thursday. We have now entered a new era of weak/negative like-for-like sales, falling industry profits and falling industry returns.”

Tesco reported its worst Christmas in decades, resulting in the biggest one-day fall in Tesco’s stock since 1988.

Tesco’s chief executive Phil Clarke said 2012/13 operating profits will be flat, against expectations of a 10 per cent rise.

Tesco is expected to invest hundreds of millions in improving its fresh food offer as well as making the shopping trip more attractive for customers.

It will also invest in staff and better products as well as continuing a price-cutting campaign launched in September.

Tesco declined to say how much the investment will be worth.

“There is a real determination to step change the performance of the UK business,” said Mr Clarke.

“The focus is now on improving the shopping trip for customers.”

He added that he was disappointed over UK Christmas trading after the group had made such a big effort to get the pricing right.

In hindsight he said the company should have gone harder on promotions and coupons.

“We chose not to run a barrage of coupons as others did.”

Tesco will cut back openings of its big superstores and will channel sales of non-food items through the internet instead.

“Stores will be largely food with some complementary non-food and the internet will take up general merchandise, such as clothing and electronics,” said Mr Clarke.