Tesco reports drop in sales growth

Supermarket giant Tesco today reported a halving in UK sales growth in the third quarter after it said like-for-like sales rose by 2%.

The 2% figure for the 13 weeks to November 22, excluding fuel, was down from the 4% reported in the previous three months.

Tesco said inflation had fallen “substantially” in the three months to the end of September, with prices in its stores falling even faster, according to the retailer.

It said the recent launch of cut-price ranges - such as its new 'Discounter' lines - was helping lower prices for cash-strapped shoppers, but had deflated its sales by ``between two and three percentage points''.

However, Tesco said the move was seeing it attract 300,000 more customers each week.

“We are also beginning to see strongly improving sales volumes – this is an important change, as inflation begins to subside across the industry,” said Tesco.

Its upbeat outlook on customer numbers and sales volumes comes despite recent reports that it is seeing swathes of shoppers defect to rivals Asda and Morrisons.

Switching data from industry researchers TNS Worldpanel showed that in the 12 weeks to November 2, around £22m (€25.9m) of spending shifted from Tesco direct to Asda, according to The Times today.

Tesco said its UK business had made “solid progress”, but admitted it was not immune to the wider economic troubles.

“We are pleased with our progress, but we are also realistic – the current economic climate, and the strain this is putting on consumers everywhere, is something that all businesses are feeling, including ours,” said the firm.

Total group sales rose by 11.7% in the three-month period, with total UK sales growth of 5.9%.