Tesco sees overseas sales offset weak UK

Tesco has posted a 3.7 per cent rise in first-half profit as overseas growth helped it to overcome one of its worst ever falls in underlying sales in its main British market.

Tesco, which takes more than one in every ten pounds spent in British shops, said on Wednesday it made an operating profit of £1.77bn in the 26 weeks to 27 August on a 7.8 per cent rise in sales to £31.8bn, excluding VAT sales tax.

Analysts had forecast an operating profit of about £1.83bn and sales of £31.9bn.

The figures compare favourably with bigger international rivals Wal-Mart and Carrefour , as Tesco expands in fast-growing Asian markets like Thailand and reduces its losses in the United States.

However, Tesco said sales at British stores open over a year fell 0.7 per cent year-on-year in the second quarter, excluding fuel and adjusted for VAT, following a 0.4 per cent drop in the first.

Britons are suffering the biggest squeeze on disposable incomes for decades amid rising food and fuel prices, subdued wages growth and a government austerity drive.

Tesco, which makes about two thirds of its sales and profits in Britain, is suffering more than rival grocers because it sells a higher proportion of discretionary goods where shoppers are cutting back most.