Tesco has reported a 1.5% drop in like-for-like sales for the past three months.

The economic crisis in Europe began to take its toll on Tesco’s international business, meanwhile. Sales on the Continent went into reverse, down 4%, with international sales as a whole - the key generator of Tesco’s growth in recent times - up just 3% excluding fuel over the period.

Total sales for the group were up 2.2% in the 13 weeks to 26 May.

“Tesco has performed robustly in the first quarter despite subdued consumer confidence in all our markets,” said chief executive Philip Clarke.

“We are rapidly implementing our six-point UK plan and I’m particularly proud of the relaunch of our Everyday Value range and the fact we have now put extra staff into 700 of our stores - in 500 of them within the last three weeks alone.

“Our customers are seeing the evidence of the changes we’re making and they’re telling us they like what they see.”

He added: “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.”

However, Clarke admitted he would like to have seen a bigger contribution from its US arm, Fresh & Easy, which recorded an underwhelming  3.6% increase in sales year-on-year.

“We need a bit more from Fresh & Easy,” he said. “It would have been nice to have had double-digit like for like growth and we didn’t have it.”

The view from analysts was mixed, with some saying Clarke’s turnaround plan had not yet been given enough time to make an needed impact. But others questioned Tesco’s long term vision.

“Tesco still lacks a clear definition of its USP, continues to offer a bland and soulless shopping experience and will be hard pushed to maintain its market share over this financial year,”  claimed Phil Dorrell, director at retail consultancy Retail Remedy.

“After the terrible performance last year and saying they would throw the kitchen sink at it to improve things, we expected to see far stronger numbers,” he said. “The leadership still seems to be focused on the quick fixes, more appropriate to running a store than a business, and maybe this highlights the real issue.

“With MacLaurin and Leahy, Tesco had brave leadership that looked far into the future though the eyes of trusted and talented people. These days Tesco appears to be looking at the ground around its feet through the eyes of one man. It’s not hard to see which approach brings the most success.”

Analysts at Conlumino said there had been some evidence of Tesco’s fightback starting to make an impact, including the launch of its new Everyday value range. But it added: “From these results one message comes through loud and clear: there is no quick fix solution to the issues with Tesco’s UK business and a tremendous amount of work still remains [to be done].”

Topics