LONDON: Tesco, the world's No.3 retailer, missed forecasts with a second consecutive quarterly fall in underlying sales in its main British market as cash-strapped shoppers there cut back on discretionary spending.
The supermarket group said on Tuesday sales at British stores open at least a year fell 0.1 percent, excluding petrol and changes in VAT sales tax, in the 13 weeks to May 28, the first quarter of its financial year.
Most of Britain's retailers are struggling as shoppers grapple with higher prices, subdued wages growth and cuts in public spending as the government seeks to slash its deficit.
Stores focused on discretionary purchases are being hardest hit, with household goods group Home Retail reporting a plunge in sales at its Argos chain last week.
Tesco, which makes about two thirds of its sales and profits in Britain, said like-for-like non-food sales fell about 5 percent, slightly better than the previously quarter.
Finance Director Laurie McIlwee declined to comment on whether Britain's government was cutting spending too quickly.
However, he told reporters the biggest challenges facing shoppers were higher prices for fuel and utility bills.
Separately, British mobile phone retailer Car-phone and US partner Best Buy said on Tuesday they were evaluating the next steps for their UK mega-stores business, which some analysts think could be closed down.
Tesco, which runs over 5,000 stores in 14 countries, said group sales rose 6.7 percent excluding petrol, helped by a stronger performance in most of its overseas markets compared with the previous quarter.
Like-for-like sales were up 2 percent in other European markets, up 3.2 percent in Asia, and up 11.1 percent in the United States, where the group is aiming to break into profit by the end of fiscal 2012-13 after years of heavy losses.
Tesco lagged sales growth at major UK rivals over Christmas in part due to its larger exposure to discretionary non-food purchases.
New Chief Executive Phil Clarke also said the group needed to spruce up its non-food products and be more innovative.
Analysts expect J Sainsbury, Britain's third-biggest grocer behind Wal-Mart's Asda and Tesco, to report on Wednesday a 1.3 percent rise in sales on a comparable basis for the 12 weeks to June 11.
Tesco, which trails France's Carrefour and US industry leader Wal-Mart in the world retail rankings by annual sales, said its outlook and expectations for the full year remained unchanged.
Copyright Reuters, 2011
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