Tempus analysis on Tesco

Tesco has reported a 2 per cent rise in like-for-like UK sales over the past three months, its worst performance since the 1990s, as new figures reveal that record numbers of shoppers are abandoning Britain's biggest supermarket in favour of its rivals.

Excluding petrol, UK like-for-like sales, which strip out gains from new stores opened in the three months to November 22, rose 2 per cent and, including fuel, increased by 3.2 per cent.

Overall, total UK sales grew 5.9 per cent and group revenue across Tesco rose by 11.7 per cent.

Times Archive, 1977: Tesco's high risk tactics ring up sales

Empty shelves and queues of delivery vans bear witness to the almost embarrassing populairty of Tesco's price cuts policy

• Tesco changes course with larger stores and a quieter image

• Grocery chains set for High St price war

• Tesco moves up price-cutting league

Related Links

• Tempus analysis: A little helps

• Shoppers leave Tesco for rivals at record rates

• Tesco can still deliver the goods

UK like-for-like sales have halved since this time last year, when the retailer reported 4 per cent growth.

Sir Terry Leahy, chief executive of Tesco, said: "We are pleased with our progress but are also realistic - the current economic climate, and the strain this is putting on consumers everywhere, is something that all businesses are feeling, including ours."

He added: "We are adjusting our business to meet the new challenge - focusing on becoming even cheaper for customers, keeping our costs low to help us to do this and managing our balance sheet and cash carefully. As we apply all the resources of the group to these priorities, I remain confident that Tesco can maintain a strong business performance and pursue its long-term strategy even in tough times."

Tesco admitted that non-food sales were holding back the overall growth of the company, but said that its general merchandise "retained a strong appeal to consumers even in difficult times".

However, The Times reported this morning that, according to previously unpublished figures from TNS Worldpanel, in the three months to the beginning of last month about £22 million worth of consumer spending was switched directly from Tesco to Asda.

Separate figures from TNS Worldpanel also show Tesco trailing its rivals in growth for the 12 weeks to November 4. Sales grew 5.4 per cent compared to a rise of 9.4 per cent at Wm Morrison, 9 per cent at Asda and 6 per cent at Sainsbury's.

Tesco said this morning that its new 'Discounter' range was drawing an additional 300,000 shoppers to its stores every week.

But there is a view that this drive to cut prices might have backfired, as the TNS Worldpanel indicates that the greatest threat to Tesco comes from Asda and Morrisons, fellow members of the "big four" group of supermarkets, and not from the discount chains Aldi and Lidl.

Shares in Tesco have lost 40 per cent of their value in the past 12 months.

This morning, they rose 6.22 per cent, to 305.9p.

International sales rose 28.1 per cent at actual exchange rates, or 14.6 per cent at constant rates. In Asia, sales grew 29.4 per cent, but in Europe growth slowed to 6 per cent.

The retailer said it was on course to deliver a programme of new store openings, which translates into 8 million square feet of store space in its international operations.

Fresh & Easy, its American venture, has attracted criticism. In November, The Times reported that Tesco was being forced to slow the pace of its programme in the US amid the economic downturn.

This morning the company said that its decision to "maintain, rather than accelerate" its expansion in the US had been a "prudent" one.

The retailer also reported that it plans to push ahead with its acquisition of the remaining 50 per cent of its banking initiative, Tesco Personal Finance, from Royal Bank of Scotland.

Shares in RBS rose 3.83 per cent to 56.9p in early trading today.

Tesco said the deal will enable it to "press on with our exciting growth plans in that market".

Money Central: The 10 items that are falling in price fastest

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts