Tesco UK like-for-likes fall 1.5% in third quarter as supermarket's chief executive Philip Clarke blames tough market

Tesco said the change in performance from Q2 – where it reported flat like-for-likes – to Q3 is “broadly in line with the weaker growth seen in the UK grocery market as a whole”. It said consumers are still managing the effects of an unprecedented period of declining real incomes and a higher cost of living, and pointed out the average spending power of a typical UK household is around 10% below its 2007 peak.

Tesco chief executive Philip Clarke said: “Continuing pressures on UK household finances have made the grocery market more challenging for everyone since the summer and our third-quarter performance reflects this. The actions we have taken to position the business for the future - including the work currently underway to transform our general merchandise offer and our decision to significantly reduce the amount of new space we open - are also holding back our sales performance in the short term.”

Tesco group sales for the 13 weeks ending November 23 were up 0.6% but like-for-likes were down in all its international markets.

Like-for-likes in Asia declined by 5.1%, affected by the Korean regulatory restrictions on opening hours, and improvements in Thailand were offset by a tougher comparative.

Like-for-likes were down 4% in Europe, with Ireland suffering “extremely challenging conditions”.

Tesco suffered like-for-like falls in all its international markets. The grocer said Poland and Turkey, two markets where it has made strategy changes, are both showing an improved performance.

Despite the challenging performance, Tesco said “we are performing in line with market expectations for the full year”.

Clarke said: “We are confident that our strategic priorities - strengthening the UK business, establishing multichannel leadership and ensuring capital discipline - are the right ones and that they will drive long-term value and returns.”

Shore Capital analyst Clive Black said: “Tesco has revealed what, by its own history and standards, is a disappointing and poor trading statement for the company over Q3. Against far from compelling comparatives across much of the group, but particularly Europe and the UK, Tesco has not managed to break the constraint of subdued revenue growth. That said, we are relieved that full-year expectations as guided by the company remain intact.”

Tesco said its Build a Better Tesco in the UK plan is continuing, with the relaunch of its Finest range, and tailoring the range in each of its 1,600 Express stores. It has refreshed 1.8 million sq ft of space in the quarter and it said recent sales uplifts are “continuing to outperform average results”.

Tesco said its work to transform general merchandise has continued but once again held back top-line growth but supported its trading margin.

It has sold 300,000 Hudl tablets to date, more than it planned to sell in total in the run-up to Christmas.