Bad weather freezes Tesco's non-food business

London: Tesco has 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.

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

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

Underlying growth

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

McIlwee estimated the bad weather had wiped 1 per cent 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, who is due to hand the baton to chief executive designate Phil Clarke in March, at the helm.

Positive cues

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."

Tesco had a slightly disappointing Christmas, although 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.

Dixons came close to issuing a profits 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 per cent 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 per cent. However, its Nordic operations performed better, with an 11 per cent rise in like-for-like sales.

Philip Dorgan, analyst at Altium Securities, said that Dixons had experienced "a tough Christmas, largely as expected."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 per cent.

Halfords did reap some benefits from the snowy weather —thanks to a surge of customers buying car maintanance products. Halfords fitted 29 per cent more bulbs, blades and batteries than a year ago, but admitted that profits would be "at the lower end" of City expectations.

Chocolate seller Thorntons was another casualty of the icy blast that struck Britain in December. Its like-for-like sales fell by 5.9 per cent 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 per cent and that its profits would be at the lower end of expectations.

Criticism

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 per cent decline in sales in the last quarter of 2010. Food sales at the mutual group were down by 3.2 per cent.

"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 per cent plunge in like-for-like sales in the 15 weeks to January 8.