vallierojas: Tesco sales slump over Christmas

? Icy conditions cost Tesco estimated �50m
? Tesco figures weaker than Morrisons, Sainsbury's
? Co-op, Dixons, Halfords, Thorntons, Game and New Look issue downbeat trading statements
? Argos sales fall, but HRG expects to meet forecasts
? Retail interactive: Christmas winners and losers

Tesco today blamed a disappointing Christmas performance on the snow as a slew of major high street chains reported sharp sales falls over the crucial festive trading period.

Shares in UK's biggest retailer fell sharply after it blamed a poor performance at its vast non-food business on the weather, which it said prevented shoppers from reaching its out-of-town stores. Analysts believe the icy conditions cost Tesco around �50m in lost sales.

The toll of the snow on retailers' sales was underlined as the Co-operative Group, Dixons Retail , Halfords, Thorntons, Game Group and New Look all issued downbeat trading statements.

Tesco described like-for-like sales growth of 0.6% for the six weeks to 8 January as "solid" but the figure was weaker than the 1% reported by rival Morrisons at the start of this week.

Its finance director Laurie McIlwee said its food business, helped by strong sales of upmarket Finest range, had seen underlying growth of 1.7% but that was countered by 1.5% slump in underlying sales at its non-food division which spans clothing, electricals and homewares.

McIlwee estimated the bad weather had wiped 1% off Tesco's UK like-for-like figure and said it had been harder hit than rivals such as Sainsbury's because it had a greater number of out of town stores which shoppers had struggled to get to during the heavy snow.

"In non-food, weather disruption for customers travelling to our larger stores was unhelpful and this, combined with demanding comparisons against last year's very good performance, meant that growth was subdued," said the retailer.

Within non-food McIlwee said areas such as books, gaming and toys had done well but admitted it sold out of some key Apple products.

It was the last Christmas with Tesco's long-serving chief executive Sir Terry Leahy at the helm ? he is due to hand the baton to chief executive designate Phil Clarke in March. He said: "Our performance remains solid but was hindered in the run-up to the important Christmas trading period in the UK by the disruptive effects of the severe winter weather conditions."

Philip Dorgan, analyst at Altium Securities, said: "Tesco had a slightly disappointing Christmas, although if we were to be critical, then we would say that it has fallen short of how the market would have expected it to have performed from the time of its third-quarter announcement, whereas Sainsbury has actually done better."

Shares in Tesco fell by nearly 3% in early trading to 410p.

Frozen bikes, chocolates

Dixons came close to issuing a profit warning, telling the City that pre-tax earnings for the year would be "at the bottom end of forecasts". It said the snow had cost it around 2% of pre-Christmas sales in the UK and Ireland, where like-for-like sales at its Currys and PC World outlets were down by 4%. However, its Nordic operations performed better, with an 11% rise in like-for-like sales.

Dorgan said that Dixons had experienced "a tough Christmas, largely as expected". Shares in the company fell by 6% when trading began, to 22p.

Halfords reported that it had been hit by a surprise drop in the number of parents giving their children bicycles for Christmas. Cycle sales, which had been growing strongly over the last couple of years, fell by 16%. Halfords did reap some benefits from the snowy weather ? thanks to a surge of customers buying car maintenance products. Halfords fitted 29% more bulbs, blades and batteries than a year ago, but admitted that profits would be "at the lower end" of City expectations. This pushed its shares down by 1.8% to 412.3p.

Chocolate seller Thorntons was another casualty of the icy blast that struck Britain in December. Its like-for-like sales fell by 5.9% over the last three months of 2010, which it blamed on the "adverse weather conditions".

Game Group, the struggling video games retailer, said its like-for-like sales had fallen by 2.1% and that its profits would be at the lower end of expectations.

Some City analysts have criticised retailers for blaming the snow for poor performance over Christmas, pointing out that John Lewis, House of Fraser and Sainsbury's all performed well. Other Christmas winners include Blacks, Majestic Wine and JD Sports.

This did not prevent the Co-operative Group citing last month's "severe weather conditions", as it reported a 0.6% decline in sales in the last quarter of 2010. Food sales at the mutual group were down by 3.2%.

"The exceptionally cold weather created logistical issues for our food stores ? particularly given the sheer scale and geographic spread of our estate," said Peter Marks.

New Look, the fashion retailer, also said that December's grim weather was to blame for a 9.1% plunge in like-for-like sales in the 15 weeks to 8 January. Chief executive Carl McPhail also warned that the company was cautious about its prospects in 2011, with VAT now raised to 20%.

The picture was slightly better at Home Retail, which reported that like-for-like sales at Argos fell by 4.9% in the last 18 weeks of 2010. It also operates Homebase, where comparable sales dipped by 1.2%. But with profits margins higher, the company still expects to meet profit forecasts.

"Home Retail did not have a great Christmas ? as was expected ? as consumers looked for value in many of its markets, rather than treats elsewhere," said Dorgan. "While over the course of the recession, we think that it gained in strength (if not profit), it now faces increased competition from both online operators and the food retailers," he added.

Shares in Home Retail rose by almost 8% this morning to 223.9p.

Zoe Wood

Graeme Wearden

guardian.co.uk © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds