Tesco suffers from weak UK market

Bloomberg

Amazon.com Inc. stepped up its push into the UK, threatening Tesco Plc with tougher competition as Britain’s largest retailer said it’s feeling the squeeze from Brexit-related political turmoil.
The US online giant is expanding its alliance with Wm Morrison Supermarkets Plc to offer groceries in more cities across the UK. The move puts more pressure on rival grocers, including market leader Tesco, to ramp up their own online operations in one of the world’s foremost e-commerce battlegrounds. Amazon and Morrison plan to introduce Prime Now same-day delivery service to cities including Glasgow and Liverpool this year, Morrison said. The grocer’s shares rose as much as 2.9 percent in London, the most since January.
Tesco fell as much as 3.3 percent after the company said domestic comparable sales rose at only half the rate analysts expected in the first quarter. The results show the supermarket operator is not immune to the challenges facing other British retailers, which are reeling amid competition from discounters, the rise of online shopping and side effects of Brexit. “The subdued nature we talk about is the consumer sentiment, which is weakening in the UK,” Tesco Chief Executive Officer Dave Lewis said on a call with reporters. “Some of that is clearly driven by the
political situation.’’
The governing Conservative Party is seeking a new leader after the resignation of Prime Minister Theresa May, which followed her inability to secure Parliamentary approval for her Brexit deal. The country’s planned EU exit has been delayed until October 31, leaving shoppers in limbo over what comes next.
UK retail sales plunged 2.7 percent from a year earlier in May, the biggest drop since at least 1995 when excluding Easter distortions, industry figures showed. Empty storefronts are multiplying on the country’s shopping streets as billionaire Philip Green’s Arcadia Group Ltd. becomes the latest of a series of retailers to shut dozens of shops.
As consumers desert the country’s malls and downtown shopping districts, they’re buying more online, and about one-fifth of the UK’s retail spending occurs via e-commerce — one of the highest proportions in the world.

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