Tesco sees ‘solid’ start to the year

The retailing giant Tesco has revealed a strong first quarter at its UK stores, with same store sales gaining 4.3 per cent and total sales performing even better, with a 9.7 per cent increase. However the positive figures were dwarfed by its performance overseas, which saw it increase sales in Asia by over 43 per cent and in the US by 174 per cent as a result of the weakness in the pound. Overall, sales in the 13 countries outside the UK in which it runs stores grew by 20.1 per cent.

Chief executive Sir Terry Leahy said of the figures: "We've made a solid start to the financial year, maintaining good momentum in a challenging economic climate." He praised the performance in some of the group's non-food areas, like Tesco Personal Finance, and other recent acquisitions and said the relaunched Clubcard loyalty scheme had seen a strong response.

The group announced the highest-ever profits for a UK retailer in April, but as the economic downturn has gathered momentum it has seen its position threatened by a number of discount retailers. It is also seeing increased competition from UK retailers like Sainsbury's, which is expected to announce a 7.3 per cent increase in like for like sales tomorrow. Asda recently announced a sales increase of over eight per cent and Morrisons, the first major retailer to announce quarterly sales said it saw a 7.3 per cent increase in the first quarter.

WHAT THEY ARE SAYING:Victoria Thomson in the Scotsman: "Figures from Nielsen recently revealed that supermarkets have been offering record levels of discounting, with 34 per cent of all sales of goods on offer in May - higher than the 28 per cent normally expected for the month. Tesco has been losing market share to rivals as consumers switch to find the best deal."

Julia Finch in the Guardian: "Tesco's growth has been hit by its introduction of cheaper brands aimed at halting the flood of bargain-hunting customers to heavy discounters like Lidl and Aldi, and frozen food stores like Iceland, which on Friday reported like-for-like annual sales growth of 16 per cent. Tesco, and some analysts, argue that the strategy has been successful because it has stemmed its losses in customer traffic. But the lower-price items have affected growth in revenues and Tesco's market share by value." ·