Tesco UK like-for-likes excluding VAT and petrol fell 1% in its first quarter as its general merchandise arm pulled down performance.
Total UK sales excluding petrol were up 1% at constant exchange rates “despite a subdued market”. Group sales increased 0.7% in the 13 weeks to May 25.
The UK’s largest retailer said it reported “positive and improving” like-for-likes in all food categories except frozen and chilled convenience, which was impacted by the horsemeat scandal.
Tesco said its overall UK like-for-like performance had been held back by its “disproportionate exposure to consumer electronics and, increasingly, by the consequences of implementing our accelerating general merchandise strategy, as we shift our business from low-margin, low-growth categories to higher-margin, higher-growth categories”.
Clothing “once again delivered a strong performance in the quarter”, Tesco said.
Asia like-for-likes fell 3.8% “largely driven by the continuing impact of the regulatory restrictions on opening hours in Korea”.
European like-for-likes were down 5.5%. Tesco said: “In all markets, consumers continue to exercise caution in their shopping habits, as they face the direct impact of a variety of austerity measures linked to the tough economic environment.”
Tesco said its exit of the US “continues on track and we will update the market as appropriate”.
It reported that its online grocery business continued to “outperform the market”.
Tesco chief executive Philip Clarke said: “In April, we set out our approach for growth and returns for the group, including a number of appropriate and realistic objectives for the years ahead and we have started the year on track, despite a continued difficult economic environment for consumers.
“This is notwithstanding our planned work on general merchandise, which has held back sales in the UK, and a small but discernible impact on frozen and chilled convenience food sales due to the customer response to equine DNA being detected in four products.
“Importantly to the objectives we have set out for sustainable and disciplined growth, customer perceptions are improving across all aspects of the shopping trip in the UK, driven by continued progress on our plans to ‘Build a Better Tesco’ and our market-leading multichannel offer.
“We have set out our plans to put customers back at the heart of the way we do business, and this is particularly evident in our recent initiatives on price and on food trust. Customers across the UK are embracing Price Promise and we are encouraged by performance in our core fresh food categories and uplifts from refreshed stores.
“Conditions outside the UK remain challenging and we have broadly maintained our performance from the fourth quarter of last year. Whilst we are not expecting economic conditions to improve in the near term, we have a customer-focused plan for the year in each of our markets which takes this into account, and we will maintain a disciplined approach to investment and cash flow as outlined in April.”