Tesco sales worsen as UK grocery market slows

London - Incoming Tesco boss Dave Lewis was served a stark reminder of the challenge he faces to revive Britain's No.1 grocer on Wednesday, as industry data showed its sales decline had worsened, hurt by the weakest market growth in a decade.

The data from market researcher Kantar Worldpanel showed Tesco's sales fell 4.0% year on year in the 12 weeks ended August 17, with its market share dipping to 28.8% from 30.2%.

The fall was worse than the 3.8% decline Kantar data showed for Tesco sales in the 12 weeks to July 20 last month. Last month Tesco ditched chief executive Philip Clarke in favour of turnaround specialist Lewis, who will arrive from Unilever on October 1.

The decision to end Clarke's disastrous three year reign came as Tesco issued its second profit warning in two years.

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Overall UK grocery market growth for the latest period fell to 0.8% - the lowest figure for 10 years, Kantar said, as consumers shop around for deals to save money and waste less by buying little and often in local convenience stores or online.

Market growth was also impacted by grocery price inflation falling for the eleventh consecutive period, standing at 0.2%, the lowest level in Kantar's dataset which began in October 2006.

No.4 player Morrisons, which like Tesco is undergoing a turnaround plan aimed at improving its fortunes, saw its sales fall by 1.9% in the 12 week period, with its market share down from 11.3% to 11%.

Tesco and Morrisons are being particularly hurt by the rise of the German hard discounters Aldi and Lidl , and have responded by cutting prices.

Sales rose 29.5% at Aldi and by 18.3% at Lidl, with both firms maintaining record market shares of 4.8% and 3.6% respectively, helped by half of UK households shopping at either outlet in the past 12 weeks, Kantar said.

Sainsbury, battling with Walmart's Asda to be the UK's No.2 grocer, saw sales rise 0.3%, though its market share fell slightly from 16.5% to 16.4%. Sales at Asda grew 1.2%, while Waitrose was the other strong performer in the period, buoyed by home delivery offers, with sales up 3.6%.

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