Tesco growth falters on low food inflation

TESCO, the UK’s biggest supermarket, yesterday said stalling levels of food price inflation had put the brakes on its sales growth for the first quarter of the year.

Like-for-like sales in the UK, adjus­ted for VAT, inched up just 0.1 per cent over the three months to the end of May, excluding sales of petrol.

Tesco said that overall like-for-like sales growth stood at 3.8 per cent over the quarter, including petrol, though it blamed higher fuel costs for customers spending more of their weekly budget on refilling their cars rather than on food shopping. That was compounded by unusually low inflationary pressures on food over the period, comparing unfavourably with very high levels of food inflation in the same three months last year.

Yet long-standing chief executive Terry Leahy was bullish on the results, after stunning the market last week by revealing plans to retire next year. “The long-term global recovery is well underway although the pace and strength of economic recovery varies across our markets,” Leahy said. “We’re in good shape.”

Tesco said international like-for-like sales remained flat compared with the previous quarter, with slight growth in Europe offsetting a nega­tive trend in Asia, held back by political uncertainty in Thailand and Korea.

The group’s growing US franchise Fresh & Easy gave a welcome boost to group sales, with like-for-like sales up 37.8 per cent on new store openings.