The group, which is 21 months into a turnaround plan, said like-for-like sales fell 2.4 per cent in the six weeks to 4 January, blaming weakness in the grocery market and a greater than expected shift of general merchandise online.
Tesco’s UK online grocery stores sales jumped 14 per cent and convenience was also boosted by consumers shopping more locally.
But this came at a cost for Tesco’s struggling out-of-town stores.
The performance also led Tesco to effectively downgrade its full-year forecast, causing shares to fall more than three per cent yesterday before closing down one per cent.
Tesco said profits will be “within the range of current market expectations” but admitted that those expectations were now between £50m and £150m lower than those forecast in December.
Finance director Laurie McIlwee said: “In hindsight we were a little too optimistic at the beginning of December. There has been a much greater shift of general merchandise online…and further weakness across the whole of the grocery market which we didn’t anticipate.”
Analysts now expect a profit in the range of £3.16m and £3.42m.
The change will put pressure on McIlwee, with Shore Capital analysts warning that yet another downgrade was like “catching a falling knife...until we have more confidence in the visibility of forecasts then investors will be more reluctant to buy the stock”.