Sales boost for Tesco

Supermarket giant Tesco shrugged off economic uncertainty and fiercer competition to post healthy first-quarter sales growth today.

Excluding petrol, Tesco grew UK like-for-like sales by 3.5 per cent - in line with management forecasts and City estimates.

Chief executive Sir Terry Leahy said: "Core food categories showed good growth as we helped customers spend less at a time when household budgets are becoming stretched."

Sir Terry said the company had made a "solid start" in the UK although non-food sales growth slowed as consumers took a more cautious approach to spending.

At the time of the retailer's April annual results Tesco said same-store sales were running above 4 per cent, although this eased back as the firm faced competition from the likes of Asda, Sainsbury's and Morrisons.

Recent supermarket market share figures have shown customers looking to save on

household bills flocking to discount stores such as Lidl and Aldi.

Tesco's finance director Andrew Higginson said discounters were "having a moment in the sun", but added that the grocer's 3.5 per cent same-store sales growth was "by any definition a good number".

Mr Higginson said non-food sales growth had slipped behind food "for the first time in a long time" as shoppers cut back on bigger ticket items such as furniture.

But despite the slower pace of non-food growth, Tesco said it was still outperforming the wider market and gaining market share.

Mr Higginson remained upbeat despite the gathering economic gloom, saying: "Employment is still pretty full and at this stage we are seeing consumers prepared to spend where they see value."

Including petrol - which has soared in price during recent weeks as the cost of oil reaches all-time highs - like-for-like sales were ahead 6.4 per cent in the three months to May 24, Tesco said.

The retailer was also helped by a weaker pound, which boosted takings at its international business. Sales rose by 26.6 per cent at actual exchange rates, compared with 13.9 per cent at constant rates.

Tesco reported a particularly strong performance in Europe as well as "encouraging" growth in Asia. The group added that it had the finances in place to support growth and the recent £958 million acquisition of 36 Homever hypermarkets in South Korea, where it has operated since 1999.