Tesco sees UK sales hit by shopper woes

TESCO yesterday reported its weakest six-monthly UK sales growth figures for 20 years as higher food and fuel costs took their toll on household budgets.

UK like-for-like sales, excluding petrol and VAT, fell by 0.5 per cent in the six months to 27 August.

The retailer said that underlying sales of food were up but larger stores had been hit as shoppers spent on essentials but reined in spending on gadgets and other consumer items.

Tesco chief executive Philip Clarke said the sales were “slower than planned”, blaming the performance on the most “challenging retail market we have seen for a generation”.

Tesco said that higher petrol prices were also taking their toll as customers travelled less frequently to out-of-town larger stores.

However pre-tax profit from continuing operations climbed 12 per cent to £1.88bn as gains in Asia and a narrower loss in the US helped offset the company’s relatively poor UK performance.

Tesco said it would put off plans to expand Tesco Bank until next year. The firm also booked a £57m charge related to payment protection insurance, casting a further shadow over its nascent banking operations.

Last week Tesco launched a £500m price cuts campaign – the “big price drop” -- in a bid to extend sales and market share. Tesco shares gained 3.5 per cent, slightly ahead of the market.