Tesco has reported that its UK sales growth more than halved in the first quarter, attributing the slowdown to the ongoing conflict in the Middle East, which has created uncertainty for many households.
Sales figures
The UK's largest retailer said comparable sales rose 1.8% in the three months to the end of May, significantly lower than the 4.2% growth recorded in the previous quarter. However, the figures were boosted by an 8.9% increase in online sales and exceeded analysts' expectations. Overall group sales edged up 1% to £16.8bn.
Factors behind the slowdown
The deceleration in UK sales growth reflects weakened consumer confidence amid higher fuel prices linked to the Middle East conflict. Additionally, exceptionally warm and sunny weather during the same period last year boosted food and drink sales, making year-on-year comparisons less favorable.
Tesco's strategic responses
Tesco extended its price-matching pledge against German discounter Aldi to over 2,000 of its small Express stores and launched 520 new products. The company stated it is "well placed to build on our progress to date."
Chief executive Ken Murphy commented: "I am pleased with our progress in the first quarter, with customer satisfaction up strongly and continued sales growth building on the exceptional performance we delivered last year. With the conflict in the Middle East creating ongoing uncertainty for many households, we remain focused on giving customers the very best combination of price, quality and service."
Booker wholesale performance
Sales at Tesco's Booker wholesale division fell 3.2%, with declines in sales to independent retailers and catering businesses due to tough conditions on the high street.
Profit outlook
Tesco reiterated its expectation to meet profit forecasts for the year. Analysts anticipate a profit of £3.25bn in the current financial year. In April, the company had cautioned about a potential drop in annual profits, which would mark the first decline since 2023. In the year to 28 February, profits rose 8.5% to £2.4bn, with sales up 4.3% to £66.6bn, driven by strong UK growth.
