Tesco maintains guidance after in-line quarter

Supermarket giant Tesco was putting a brave face on things as like-for-like (LFL) sales continued to decline in UK stores in the group's first quarter, as expected.

In the 13 weeks ending May 26th, UK sales including value added tax (VAT) and petrol grew by 2.1% and by 2.0% excluding petrol. LFL sales, excluding both VAT and petrol, reduced by 1.5% in the quarter. Tesco said the UK performance was in line with expectations.

Broker Jefferies had predicted a 1.3% decline in LFL (excluding fuel) for the UK stores, while Nomura had forecast a 1.7% decline.

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Looking at the worldwide picture, group sales (including petrol) rose by 2.2%, or 3.8% at constant exchange rates, and by 2.2% excluding petrol on a LFL basis, or by 3.9% at constant exchange rates.

Broker Jefferies predicted group sales growth of 2.6%, or nearly 4% excluding foreign exchange effects.

In Asia, total sales grew by 9.1% at constant rates and 9.0% at actual exchange rates, with positive like-for-like sales growth and a good contribution from new store openings.

In Europe, total sales excluding petrol grew by 6.0% at constant exchange rates, with further weakening of the European currencies against sterling affecting growth at actual rates. Like-for-like sales increased by 0.4%, helped by improved performances in Poland, Slovakia and the Republic of Ireland, which delivered its first full quarter of positive like-for-like sales growth since 2010.

In the US, Tesco's Fresh & Easy chain saw LFL sales excluding petrol rise 3.6%.

"Internationally, like-for-like sales growth proved resilient, despite slowing economic growth in China and the emerging impact of recently introduced shopping hours legislation in South Korea. Against the backdrop of continuing uncertainty in the Eurozone, it is pleasing to see that our businesses have largely sustained their performance," said Philip Clarke, Tesco's Chief Executive Officer.

The group said that at this early stage of the financial year it is performing in line with market expectations, and the outlook for the year as a whole remains unchanged.

JH