Tesco UK like-for-likes dropped 1% in its first quarter, as its general merchandise division had “held back sales in the UK”. Retail Week summarises the City’s reaction.

“Despite the profit squeeze suffered in 2012/13, there was a sense that Tesco was on the road to recovery. The end of the financial year had signalled an improving trend, with the implication that the strategy put in place by chief executive Phil Clarke was starting to bear fruit. However, these results demonstrate that the view Tesco had put the worst of its troubles behind it was somewhat premature.” - Matt Piner, Conlumino

“Tesco is talking positively about Q2 sales trends in the UK and in many other markets, which will please the ‘noise’ merchants. That said, we believe that, in the age of Digital Disruption, investors will focus less and less on like-for-like sales growth, more and more on whether the company is investing sufficiently online and whether management has the ‘vision thing’. This is why we are not too worried about one quarter’s lacklustre sales performance, especially as we like what we see in a lot of the changes in food.

“That said, we think that the underperformance in non-food needs to reverse. While we recognise that there are longer lead times, especially as space shifts from electricals to clothing, to click-and-collect and to better dining areas, it is not enough to explain poor growth by citing tough markets, or the impact of its exposure to consumer electronics.” – Philip Dorgan, Panmure Gordon

“The press is focusing on the horsemeat scandal (and Tesco admit to problems in frozen and chilled convenience sales), but with food sales about flat overall like-for-likes the real culprit behind the weak overall sales seems to be poor sales of non-food (down by “high single digits” like-for-likes, despite clothing doing well), so yet another non-food range review is underway.” – Nick Bubb, independent analyst

“While this performance was disappointing and we believe Tesco has lost UK market share, investors need to understand if the shift in sales from hypers and supermarkets to online and convenience is adding to incremental profits. Clothing sales has performed well which would indicate that electrical sales and other non-food categories may have recorded double digital falls.” – Mike Dennis, Cantor Fitzgerald