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Tesco’s core retail sales fell back in its first quarter as CEO Ken Murphy warned of the impact of “unprecedented increases in the cost of living”.

UK retail sales fell back 1.5% in the quarter to £9.9bn on a like for like basis, with the Republic of Ireland down 2.4%.

In the UK Tesco said performance impacted by annualisation of lockdown last year, most notably in GM, clothing and online, partially offset by inflation

Tesco stressed it had gained market share, with growth of 37bps and outperformance on both value and volume and noted sales were up 8.1% in the country on a three year basis.

Within the UK, its online sales slumped 14.5%, while large store sales were down 0.7%, but convenience continued to grow by 6.2%.

However, overall group performance was significantly boosted by the recovery of Booker as well as growth in central Europe.

Booker was up 19.4% on a like for like basis to £2.1bn in the quarter as catering sales jumped by 57.4% and it added 13,000 net new customers.

Booker’s retail like for like sales increased by a more modest 2.3%.

Meanwhile, central Europe was up 9% to £976m with growth driven by inflation across all three markets, despite impact of lapping lockdown.

Consequently overall group sales were up 2.5% to £13.8bn – also boosted by fuel sales, which were up 44% due to soaring prices at the pump and turned a 1.5% Tesco sales drop into 4.2% like for like growth.

CEO Ken Murphy commented: “”Whilst the market environment remains incredibly challenging, our laser focus on value, as well as the daily dedication and hard work of our colleagues, has helped us to outperform the market. Our material and ongoing investment in the powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices is removing the need for customers to shop elsewhere.

“Although difficult to separate from the significant impact of lapping last year’s lockdowns, we are seeing some early indications of changing customer behaviour as a result of the inflationary environment. Customers are facing unprecedented increases in the cost of living and it is therefore even more important that we work with our supplier partners to mitigate as much inflation as possible.”

Tesco’s forward looking guidance ranges for profit and cash remain unchanged after its first quarter.

Tesco shares are down 0.8% to 247.8p this morning.

Morning update

On the markets this morning, the FTSE 100 has clawed back a small proportion of yesterday’s losses, rising 0.4% to 7,076.1pts.

Early risers include FeverTree, down 3.1% to 1,454p, Deliveroo, down 3.1% to 83.8p and Marks & Spencer, down 3% to 136.5p.

Fallers include Bakkavor, down 1.3% to 91.8p, Naked Wines, down 1.3% to 282p and AG Barr, down 1.1% to 517.4p.

Yesterday in the City

The FTSE 100 slumped 3.1% back to 7,044.9pts after a brief respite on Wednesday as markets reacted to global interest rate hikes.

THG fell 29% back to 74.4p after two potential suitors walked away from firming up their interest in a £2bn bid for the group.

Other fallers included tech focussed grocery names, including Deliveroo, down 6.2% to 81.3p, Ocado, down 6% to 787.4p, Domino’s Pizza group, down 5.7% to 301p and Naked Wines, down 4% to 285.6p.

Other fallers included C&C Group, down 5.8% to 185.5p, McBride, down 5.3% to 24.9p, DS Smith, down 4.8% to 278.5p, Marks & Spencer, down 4.7% to 132.5p, Coca-Cola Europacific Partners, down 4.5% to €47.00, Greencore, down 4.2% to 106.7p, and British American Tobacco, down 3.5% to 3,440p.

The day’s few risers included Hotel Chocolat, up 3% to 292.5p, Bakkavor, up 1.5% to 93p, WH Smith, up 0.3% to 1,478.5p and Coca-Cola HBC, up 0.3% to 1770.5p.

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