Tesco sales hit by plunging food inflation

Supermarket giant Tesco said today that UK sales growth almost ground to a halt in the last three months as the grocer wrestled with plunging food inflation.

The firm said UK like-for-like sales excluding petrol rose 1.1% in the three months to May 30 - but, adjusting for this year's higher rate of VAT sales, crawled just 0.1% higher.

Sales stripping out petrol suffered because customers were paying around 30% more for fuel than a year ago and were shifting spending from other areas, the firm said.

Tesco also blamed comparisons with particularly high food inflation a year earlier and finance director Laurie McIlwee said the slump in sales growth was "fairly unique".

But the UK number one still expects UK like-for-like sales growth of around 3% for the full year as the group trades through the tough comparisons.

It also saw some signs of recovery despite some consumer concerns over the impact of next week's emergency Budget.

"Although customers in the UK continue to face some uncertainties about their personal finances going forward, we continue to see evidence of a steady consumer recovery," the firm said.

Chancellor George Osborne is said to be weighing up a potential hike in VAT next week to help tackle the deficit, but Mr McIlwee said the coalition had to take care in managing a fragile UK recovery.

He warned: "If there is an increase in VAT on products it should be in the future rather than now."

In the UK, Tesco benefited from its World Cup marketing campaign, with sales of some televisions more than doubling as customers traded up for the football tournament.

The firm's international business has also been helped with four of Tesco's overseas markets - South Korea, Slovakia, Japan and the USA - sending teams to the World Cup.

Tesco announced last week that its chief executive, Sir Terry Leahy, would quit next March after 14 years in charge at the retailer.

Sir Terry has led its overseas expansion although the firm added that international like-for-like sales growth had been "broadly flat" compared with the previous quarter, as political unrest in South Korea and Thailand unsettled trading.

Suggested Topics
PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
University Edible Garden, Leeds – a sustainable garden in the centre of the university, passers-by can help themselves to the home-grown produce
news
Arts and Entertainment
There are no plans to replace R Kelly at the event
music
News
newsThis 8-year-old boy carried his disabled brother through a triathlon
Sport
The Manchester United team walk out ahead of the pre-season friendly between Manchester United and Inter Milan at FedExField
transfers
Life and Style
fashionHealth concerns and 'pornified' perceptions have made women more conscious at the beach
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

BA/PM,EMIR/Dodd-Frank,London,£450-650P/D

£450 - £650 per day + competitive: Orgtel: My client, a leading bank, is curre...

Senior Analyst - ALM Data - Banking - Halifax

£350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...

Java developer - Banking - London - Up to £600/day

£500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...

Liquidity Reporting-Basel III-LCR-Bank-£400/day

£400 per day + competitive: Orgtel: Liquidity Reporting - Basel III - LCR - Ba...

Day In a Page

Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
How live cinema screenings can boost arts audiences

How live cinema screenings can boost arts audiences

Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
Shipping container hotels: Pop-up hotels filling a niche

Pop-up hotels filling a niche

Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
Native American headdresses are not fashion accessories

Feather dust-up

A Canadian festival has banned Native American headwear. Haven't we been here before?
Boris Johnson's war on diesel

Boris Johnson's war on diesel

11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
5 best waterproof cameras

Splash and flash: 5 best waterproof cameras

Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

Louis van Gaal interview

Manchester United manager discusses tactics and rebuilding after the David Moyes era
Will Gore: The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series

Will Gore: Outside Edge

The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series
The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz