Tesco today provided more evidence that growth in its UK business is slowing after making a subdued start to the new financial year because of slow sales of non-food goods.

The supermarket giant reported overall sales growth of 10 per cent for the 13 weeks to May 26, 2007. UK sales grew by 8 per cent, compared to a rise of 9 per cent in the same period last year and an 11.3 per cent increase in sales during the first weeks of 2005.

Excluding petrol, like-for-like sales, which do not include revenue from new stores opened during the period, grew by just 3.4 per cent, compared to an increase of 5.5 per cent in the comparable period last year and a 6.8 per cent rise in the first weeks of 2005. Shares in Tesco fell by 3.67 per cent to 440p in early trading.

Commenting on its UK performance, Tesco said today: "Although food category performance has been strong, our rate of growth in non-food has eased in more subdued markets."

Last week, Tesco surprised investors by branching out from its traditional supermarket business into garden centres by announcing its intention to acquire Dobbies, the Scottish company, for £175 million. The move was greeted as an attempt by Tesco to diversify its UK operations and find more areas for growth in its home market where it is the dominant retailer.

In the first 13 weeks of the year, like-for-like sales excluding gains from petrol sales rose by 4.7 per cent, a marginal improvement on 2006 when turnover increased by 4.5 per cent but down on 2005 when revenue grew by 8.8 per cent.

Growth during the period has been generated by Tesco's overseas operations, in particular Asia, where revenues increased by 32 per cent. Total international sales rose by 24.6 per cent, and Tesco is planning to open its US stores later this year.

Last year, overseas sales during the first weeks of the year rose by 15.1 per cent and by 19.9 per cent in 2005.

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