Tesco shares nosedive in Big Price Drop fiasco

Tesco shares crashed today after Britain's biggest supermarket said it suffered its worst Christmas for two decades.

The "disappointing" trading figures - likely to be the worst of any of the big supermarkets - raised fears that Britain is turning off Tesco after almost 20 years of unchallenged supremacy.

Natalie Berg, of consultant Planet Retail, said: "Tesco has taken its eye off the ball. It has focused too much just on the price of food. We now all expect high-quality food and everyone is claiming to be the cheapest - consumers are much more wary. Sainsbury's has got the balance right in terms of quality and value."

Britain's biggest private sector employer also issued a virtually unprecedented profit warning after its £500 million Big Price Drop bonanza failed to tempt shoppers into stores, leaving sales in the UK down 2.3 per cent at it busiest time of the year.

The figures stunned investors and Tesco shares slumped 53.5p, or almost 14 per cent, to 331.6p, wiping more than £3 billion off its value.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "Unfortunately the Big Price Drop reported in this update will be remembered as more reflective of the shares than the campaign." Philip Clarke, who took over as Tesco chief executive last March, denied that the price initiative had been a flop but admitted "we could have done a better job communicating it".

The share price slump comes the day after Sainsbury's said it had enjoyed its best Christmas with like for like sales growing by 1.2 per cent.

Tesco's market share has also started to slip, from 30.5 to 30.1 per cent of grocery sales over the past year, according to figures from researchers Kantar. Mr Clarke blamed rising prices for much of Tesco's problems saying that inflation was "eating into" consumers' disposable income.

He said profits in the current financial year would be at the bottom end of City expectations and in the following year there will be "minimal growth" in group profits.

Tesco, which has 2,700 stores in Britain, hopes to win consumers back with a stores revamp that has been piloted in 15 branches and has been rolled out to 200 more in the past six weeks.