Tesco UK

Higher fuel costs and very low food inflation have combined to slow UK grocery retailer Tesco’s fourth quarter sales to a VAT-adjusted 0.1 per cent.

The company said that although overall like-for-like sales growth had remained strong for the 13 weeks ending 30 May 2010, higher fuel costs had resulted in many consumers shifting their spending to petrol at the expense of their normal shopping.

This factor, combined with “very low” food inflation – due, it said, to unusually high levels during the same period a year before – had acted to constrain like-for-like sales growth to a VAT-adjusted 0.1 per cent, Tesco said in a statement.

Despite this, the retailer’s group sales excluding petrol increased by 6.9 per cent during the quarter, while total international sales rose by 11.9 per cent at actual exchange rates, excluding petrol and by 5.3 per cent at constant exchange rates.

Tesco said that longer-term trends in its international business remained encouraging as the global recovery took hold, although it noted that a number of short-term factors had impacted certain markets during the quarter.

The retailer said its international like-for-like sales performance was steady compared with the previous quarter and was broadly flat overall – slightly negative in Asia and slightly positive in Europe.

However, Tesco said sales in Asia had been “encouraging”, thanks to new store openings across the region, despite being temporarily affected by political uncertainty in Thailand and Korea.

In Europe, Tesco’s sales excluding petrol grew by 7.3 per cent (4.3 per cent at constant exchange rates), although “impressive sales recovery” in Ireland was offset by a late spring in a central Europe, the period of mourning in Poland and ongoing economic difficulties in Hungary.

In the US, the retailer said its sales were up 37.8 per cent (40.6 per cent at constant exchange rates), with like-for-like sales growth driven by increased customer numbers.

In the statement, Tesco chief executive Terry Leahy said the retailer had made 'a solid start” to the new financial year and was making “good progress” with its strategy to grow space and win market share.

“The long-term global recovery is well underway although the pace and strength of economic recovery varies across our markets,” he said. “We’re in good shape and well-positioned to deliver further growth as the economic environment continues to improve.”

The retailer added that its business was performing in line with expectations and that its outlook for the year as a whole, for like-for-like sales growth of around 3 per cent in the UK, remained unchanged.