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Last Updated: Friday, 24 June, 2005, 10:34 GMT 11:34 UK
Stronger sales growth for Tesco
Tesco trolleys
Tesco is the UK's biggest retailer
UK supermarket giant Tesco has reported strong sales growth of 14.6% in the first quarter of its financial year.

Chief executive Sir Terry Leahy said the retailer had seen "a solid start to a more challenging year".

Sales grew 11.3% at its core UK stores, compared with the year-earlier period, and were 8.8% higher on a like-for-like basis, which excludes new stores.

Tesco became the first UK retailer to chalk up annual profits of more than 2bn in its last financial year.

In its latest trading update, Tesco gave an upbeat picture of its performance since then.

"The core UK business has shown continued growth, our international operations have delivered a strong start to the year, our non-food market share has improved and our retailing services have also performed well," the retailer said.

Overseas promise

Sales in Tesco's international businesses were up 19.9% at constant exchange rates.

Its stores in central Europe have done particularly well, with a "strong customer response" in the region, the company said.

We do expect the numbers to come off a bit as the year goes on,
Andrew Higginson, Tesco finance director

Tesco has more than 2,300 stores in 13 countries including Japan, Poland, Turkey and Hungary, as well as a joint venture in China.

Overall, international sales grew 5.5% on a like-for-like basis.

Overseas expansion and moves into non-food areas like CDs and clothing, fuel and electrical goods have played a big role in Tesco's strategy to boost growth.

Strong growth in first quarter sales suggests Tesco has managed to dodge the impact of a slowdown in UK consumer spending that is hurting many High Street stores.

Rival UK supermarket Sainsbury's reported on Thursday first quarter like-for-like sales growth of 1.3% excluding petrol sales, compared to 6.8% excluding fuel at Tescos.

Tesco is taking a cautious view of its prospects for this year.

"We do expect the numbers to come off a bit as the year goes on, just because we were up against such tough comparatives last year, and I think the consumer has slowed a little bit," Tesco finance director Andrew Higginson said.

"A modest slowing is possible from here on," he added.

Tesco reported a 20% jump in pre-tax profits to 2.03bn last year, while sales climbed 12.4% to 37.1bn.

Protests

Tesco now has nearly one third of all UK grocery sales, drawing criticism from small business advocates, environmental groups, and trade unions.

The environmental group Friends of the Earth is planning to stage a protest at Tesco's annual shareholders meeting on Friday.

It is part of a coalition of eight campaign groups that has launched a website - Tescopoly - ahead of the shareholders' meeting.

The site parodies Tesco's slogan "Every Little Helps", replacing it with the phrase "Every Little Hurts". However, from a purely commercial point of view Tesco's shareholders have little reason to be feeling pain.

The company's share price has outperformed the food retailers' benchmark index by almost 9% in the past 12 months.

But with worries about the consumer spending slowdown high in investors' minds, Tesco's trading update produced a cautious response from investors at the London Stock Exchange.

Tesco's shares were down 1 penny at 317 pence on Friday morning, holding steady as worries about record oil prices sent London's blue-chip FTSE 100 index lower.




SEE ALSO:
Tesco profits break through 2bn
12 Apr 05 |  Business
Price cuts raise retail pressure
04 Apr 05 |  Business
Tesco staff in 106m share bonus
21 Feb 05 |  Business
Tesco 'to open non-food outlet'
16 Jan 05 |  Business


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