Tesco vowed to take “decisive action” to get its core UK business back on track after suffering its worst first-half performance for 20 years.

Like-for-like sales excluding fuel and VAT fell 0.9% in the three months to August 27, the supermarket giant said today.

Coming after the 0.1% dip seen in the first quarter, like-for-like sales have fallen by 0.5% in the first half of the financial year.

Despite the news, Tesco announced a group rise in pre-tax profits of 6.2% to £1.9bn.

Chief executive Philip Clarke said the company was moving to “seize the advantage” from rivals via initiatives including the Big Price Drop campaign.

“We are making substantial changes to our core UK business to sharpen execution and competitiveness for customers, investing in price and promotions, ranging, service and store environment – in food, general merchandise, clothing and electronics,” he said. “We are taking decisive action in key areas to strengthen our performance going forward.”

In the UK profits, improved by 4.5% – far behind the company’s performance in Asia, where profits surged by 18.7%. Clarke again said he was hopeful that Tesco’s US operation would break even by 2013, with losses for Fresh & Easy falling by 23% in the first half of the year.

Stressing the UK business was his top priority, Clarke said the Big Price Drop was just the beginning of a major drive by Tesco to put the squeeze on its rivals.

“We set the business up mindful of the likely downturn in consumer confidence,” he said. “The investments we’re making, such as those we made in the last week and will make in the second half, are intended to seize the advantage from our competitors.”

Clarke also confirmed that Tesco Bank has delayed its plans to offer mortgages.

Read more
Sainsbury's leans on Local presence for second-quarter growth (5 October 2011)
Suppliers fear the worst but are Tesco's cuts a drop in the ocean? (analysis; 1 October 2011)
Editor's Comment: Big Price Drop has left me both underwhelmed and baffled (1 October 2011)
Tesco Big Price Drop kicks off with a 12% price reduction (1 October 2011)

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