In the UK, sales (excluding petrol) rose 8 per cent and like-for-likes were up 4.7 per cent. Price inflation was 1.8 per cent, driven by higher market prices for commodities and seasonal fresh foods. However, the retailer said sales of non-food items, which were helped by the launch of Tesco Direct, had eased off in more subdued markets.
Tesco chief executive Sir Terry Leahy said: 'We've made a good start to the year across the group. International is delivering particularly strong growth; pushing on well with both new store development and the integration of the stores we acquired last year - and our plans to open in the US later this year are well on track. The UK has made solid progress in the first quarter, with good growth in our core food categories and further investment in improving our offer for customers, including last week's announcement of£270 million of price cuts.'
International sales soared 24.6 per cent at constant exchange rates. This included a particularly strong performance in Asia, where sales rocketed 32 per cent. The retailer said it has benefited for the first time from the consolidation of its operations in China. Tesco said: 'We are on track to deliver a substantial programme of new store openings this year, which will provide more than 7 million sq ft of new selling space in international. At the same time, the conversion of the acquired Leader Price stores in Poland and the Makro business in Malaysia is going well.'
The retailer also said its share buy-back programme has continued to return value to shareholders. A further£204 million worth of shares have been repurchased since February, bringing the total value to£586 million.
Seymour Pierce analyst Andrew Wade said: 'This was a solid, if more cautious, trading update, with international continuing its strong growth, but the UK, as expected, slipping back slightly. We are not changing our PBT forecasts at this stage, despite the initiation of the new price war with Asda leaving the outlook more challenging; particularly given the contribution inflation has made to like-for-likes across the industry over the last year.'