Tesco eyes further overseas expansion with 300 new stores

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Tesco's expansion showed no signs of abating yesterday as it announced plans to open 300 new international stores alongside a 5.6 per cent increase in like-for-like UK sales.

The UK's biggest retailer added it is still considering options to enter the Indian retail sector after a breakdown in talks with Bharti Enterprises, which entered into partnership with Wal-Mart last week.

In the run-up to the crucial Christmas period, the finance director, Andrew Higginson, said Tesco was "looking good" despite warnings that retailers face one of their worst holiday shopping seasons on record.

The increase in third-quarter underlying sales in the group's core UK stores came as Tesco delivered double-digit growth in non-food despite "a subdued market". "There's all to play for, but so far so good, we are looking forward to having a good Christmas," Mr Higginson said.

Tesco called off talks with Bharti because of "slightly different objectives", Mr Higginson said, adding there "are plenty of other fish in the sea".

Across the group, sales rose by 9.6 per cent - or 10.3 per cent excluding petrol - in the 13 weeks to 25 November. International sales increased by 17.9 per cent.

New stores will open in Thailand, South Korea, the Czech Republic, Turkey and Poland in the second half, representing the group's largest overseas opening programme to date.

Underlying sales in the core UK chain were helped by a good performance from tesco.com. Including petrol, like-for-like sales grew 8.5 per cent. Tesco said higher energy costs and increased market prices for meat and other produce sent store inflation 0.8 per cent higher but it expects these pressures to ease.

Despite the upbeat trading statement, its shares slipped 1 per cent - down 4p to 393.5p - which analysts put down to the lofty expectations surrounding Tesco. Growth has slowed from 6.6 per cent in the second quarter, and Tesco has slashed prices on clothing and alcoholic drinks to try to lure shoppers from a resurgent J Sainsbury.

Richard Hunter, the head of UK equities at Hargreaves Lansdown Stockbrokers, said: "These figures will again send a shudder down the spines of their competitors as they search for an answer to combat Tesco's relentless growth."

Philip Dorgan, at Panmure Gordon, said he believes there is plenty to go for with Tesco. "Its sales growth is driven from a consistent and sustainable trading platform, which means that its profit growth is much more visible and likely to be resilient to any further tightening of consumer spending," he said.