Tesco UK sales decline 1.5% in third quarter

Tesco is 18 months into a turnaround plan

Tesco has seen a decline in its underlying third quarter sales in the UK, with the supermarket chain blaming a weaker market for groceries.

Like-for-like UK sales - which ignore new shop openings - excluding VAT and petrol were down 1.5%.

The announcement comes 18 months after boss Philip Clarke launched a £1bn turnaround plan for the company.

Tesco's overseas businesses also saw a drop in sales, especially in Thailand, South Korea and Ireland.

'Challenging' market

In October, the UK's largest grocery chain reported a 23.5% drop in profits in the first half of its financial year.

In its latest trading update, Mr Clarke said: "Continuing pressures on UK household finances have made the grocery market more challenging for everyone since the summer and our third quarter performance reflects this."

He added that the decision to slow the opening of new retail space and work on revamping its general merchandise products was holding back sales in the short term.

Tesco said it had recently relaunched its "Finest" own brand and renovated 108 of its stores.

The supermarket chain also said was aiming to improve its online shopping experience, by offering one-hour home delivery slots and setting up so-called "click and collect" drive-through locations.

Outside the UK, Tesco saw its sales decline by 5.1% in Asia, which Tesco said was driven by a worsening performance in Thailand and South Korea.

In Europe, like-for-like sales were down 4%, and Tesco said sales in Ireland had been hit by "extremely challenging conditions for consumers".

Richard Hunter, head of equities at Hargreaves Lansdown, said Tesco's refurbishment programme was beginning to pay off, but the company still faced tough challenges.

"Competition from both ends of the price range remains intense, the general economic environment has not yet stabilised," Mr Hunter said. "Certain pockets within its international markets are under constant attack."