Tesco fashion sales dipped last year but began comeback in Q4
The UK's largest supermarket, Tesco, reported its preliminary full-year results on Thursday, and while it doesn’t always call out clothing within its results, it did actually share some information about how that part of its operation has done.
The company, which owns the F&F fashion brand, said that in the 2022/23 year, UK/Ireland non-food sales declined by 4.5% “as we traded over strong sales in Home and Clothing categories last year”.
Clothing sales declined by 1.2%, “which mainly reflects the impact of trading over exceptionally strong lockdown-linked demand in the first half of the 2021/22 financial year, partly offset by our efforts to rebalance space from Home to Clothing”.
It said it saw a “significant improvement in value perception, ahead of other clothing retailers, and the number of customers purchasing at least one product from our Home and Clothing ranges increased by 11% and 7.6%, respectively”.
The best news was that Clothing delivered growth of 7% in the fourth quarter, suggesting that the space rebalancing effort is paying off and helping to make up some of the gap between Tesco’s Clothing sales and the headline inflation figure.
Home sales dropped 6.4%, but that was driven by a 9.8% reduction in its range as it selectively exited low-margin categories such as electricals.
Yet it “outperformed the market in key categories, such as gifting and stationery” by 8.7ppts and 4.3ppts, respectively. Those figures offer some justification for the company’s purchase of the failed Paperchase brand in January, which was questioned by some analysts at the time as being a distraction for the business. Tesco said “we look forward to introducing a wider range of cards, gifting and stationery later this year”.
Overall, the company said that its group sales excluding VAT and fuel rose 5.3% to £57.65 billion. And its revenue on the same basis, rose 7.2% to £65.76 billion. But operating profit fell more than 40% to £1.52 billion and profit before tax was down over 50% to £1 billion.
Total retail adjusted operating profit dropped 6.3% at constant exchange rates to £2.48 billion and adjusted operating profit for the UK and Ireland fell 7% to £2.3 billion. This was driven by the impact of lower volumes and ongoing investment in its customer offer.
But adjusted operating profit in central Europe was up 3.6% at £180 million with volumes, resilient in the face of significant market inflation.
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