Tesco chief financial officer Laurie McIlwee said the grocer was “too optimistic” at the beginning of December and the market contracted more than it thought over the key Christmas trading period, leading to “disappointing” results.

McIlwee said: “We’d been sanguine for three months. We had a healthy summer with shoppers enjoying the weather, but the decline in disposable incomes led to a bigger than expected fall in confidence in December. We felt that in food.”

He also said there was a greater shift to general merchandise online “than we had anticipated”. He said: “The scale of the rate of change from bricks to clicks was even greater, which negatively affected our general merchandise business in stores, but had a positive effect on online – however not enough to offset stores.”

Tesco reported a UK like-for-like fall of 2.4%.

McIlwee acknowledged the impact of the discounters on the UK grocery market. “The cycle is favouring the discounters. Proximity and convenience retailing is more popular than it was and while our new space is declining as we work on a multichannel strategy, the discounters are opening an unprecedented level of new space.”

McIlwee said its larger out of town stores are suffering the most but “refreshes like Watford are showing significant uplifts”.

He said the general merchandise transformation, which includes new ranges and merchandising, is going into stores in the next few weeks which will give a “material change” to the business. He said the majority of the work should be completed by September this year.

He said Tesco is confident that the grocer is on the right strategy, and that building a multichannel business is right for customers.

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Tesco reports UK Christmas like-for-likes down 2.4%