Tesco comes clean over Clubcard redemptions
Tesco reported its best Christmas for three years this week, and insisted this was the case even without the extra £34million of redeemed Clubcard vouchers issued under its double vouchers offer.
Tesco’s Terry Leahy did admit that the double voucher offer had contributed 0.7% of its sales, which in fact would have meant Tesco’s growth, at 4.1% was in fact lower than Sainsbury’s with its best ever Christmas with sales up 4.2% while the Co-op reported a 4.8% rise.
And he also admitted that Clubcard points were a key weapon in bringing back customers, and keeping them loyal.
Although Tesco is pressing ahead with growth overseas, the UK is Tesco’s largest and primary business and its performance here is closely. In the last few quarters, it has lagged the sales growth of rivals over the past few quarters.
Tesco last year revamped its Clubcard loyalty scheme and then surprised everyone with its offer enabling of double points until Christmas.
Normally shoppers receive their vouchers every three months but Tesco added an additional Christmas mailout, sending £100 million of vouchers to customers ahead of the festive season, of which £34 million has been redeemed. And this is where the controversy set in.
Under UK full-year and interim reporting standards, voucher redemption sales cannot be counted as cash sales, but Tesco, unlike competitor Sainsbury’s includes these as cash sales when it reports trading updates outside of its full year or interim announcements.
Concern ahead of Tuesday’s results that these would artificially inflate same-store sales proved unfounded as the company disclosed the 0.7% impact while still managing to beat expectations.
A further £60 million of unredeemed vouchers still remain in customers’ hands.
No one is arguing that the Clubcard loyalty scheme has proved an enduring success story for Tesco in the Uk, and there is talk that it will launch it in the US in its Fresh & Easy convenience store chain although Finance director Laurie McIlwee said at the time there were no current plans to offer a Clubcard in the US.
One big surrise from the supermarket figures this month, was the extent to which UK customers spoiled themselves this year with luxury and premium products, in stark contrast to the austerity of Christmas 2008.
Tesco’s ‘Finest’ range grew by 16% in the period, and the company sold 35% more champagne than last year, a fine-drinking trend echoed last week by rival Sainsbury.
Outside of the UK, Tesco’s international operations also did well, with sales up 4.1% at constant exchange rates, excluding fuel, and same-store sales improving in Asia, Europe and the U.S.
Total sales in the six weeks to January 9 rose 7.5% at constant exchange rates.