Tesco records first quarter UK sales fall

The figure, which excludes VAT and petrol and covers the 13 weeks to May 26, is slightly better than the 1.6% decline in the previous quarter but is its fourth consecutive quarter of like-for-like decline.

The grocer said it had enjoyed its best ever week outside of Christmas in the week running up to and including Diamond Jubilee celebrations recording more than £1 billion of sales not included in the latest figures.

Total group sales increased by 2.2%. Like-for-like sales in Europe increased by 0.4%, helped by improved performances in Poland, Slovakia and the Republic of Ireland, which delivered its first full quarter of positive like-for-like sales growth since 2010.

However, the retailer said continued uncertainty over the future of the Eurozone had created “very low” consumer confidence, particularly in Central Europe, impacting general merchandise, clothing and electrical performances.

In Asia, total sales grew by 9.1% buoyed by growth in Thailand but held back by slowing economic growth in China.

In the US, like-for-like sales at Fresh & Easy rose 3.6% against 12.3% growth last year. Tesco chief executive Philip Clarke said the US arm had a “soft” March but performance improved in April and May and June is expected to be stronger.

Tesco said it gained share from its rivals in the UK in a declining grocery market, helped by the addition of 4,300 extra staff and the overhaul of 100 stores.

Clarke said the retailer can “see momentum gaining” after revealing a £1bn plan to turnaround the UK business by refreshing store interiors, introducing better quality products and improved service in store.

He added: “Tesco has performed robustly in the first quarter despite subdued consumer confidence in all our markets.

“Internationally, like-for-like sales growth proved resilient, despite slowing economic growth in China and the emerging impact of recently introduced shopping hours legislation in South Korea. Against the backdrop of continuing uncertainty in the Eurozone, it is pleasing to see that our businesses have largely sustained their performance.”

Barry Knight, head of retail at financial adviser Grant Thornton UK LLP, said: “It’s time to stop bashing Tesco, what is fundamentally a sound business. The first quarter interim trading statement was pretty much in line with expectations and it had, for me, important ‘nuggets’.

“Firstly, Kantar data shows that market growth declined by 1.3% – from 3.7% in Q4 to 2.4% in Q1. Total sales growth, over a very similar period, reduced by only 0.3%, from 2.3% to 2.0%, ie. the rate at which market share is being lost is decelerating quite markedly.

“Secondly, Fresh & Easy is still producing pretty decent like-for-like sales growth albeit down to 3.6%.”