SIR Terry Leahy, Tesco’s chief executive, said that trading conditions in Britain would become tougher, despite reporting sales five times better than that of rival J Sainsbury.
Speaking before Tesco’s annual meeting yesterday, Sir Terry said that the supermarket group had to deal with oil-related inflationary pressures, rising business rates in the UK and the cost of investing in Central Europe. The trading environment for Tesco Personal finance was also “tougher”.
Sir Terry said that sales in the quarter to March 21 increased by 14.6 per cent, with growth occurring in all parts of the business. Like-for-like sales in the UK, excluding petrol, rose 6.8 per cent, after allowing for deflation of 1.8 per cent.
Sainsbury’s, which updated the market on its performance on Thursday, reported a 1.3 per cent increase in like-for-like first-quarter sales, its second successive positive quarter. The UK grocery market is growing at about 3 per cent.
Tesco’s shares fell 2p to 316p in a generally weaker market.
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Dresdner Kleinwort Wasserstein, the stockbroker, described Tesco’s performance in Britain as impressive, and said that customers switching to Tesco from its competitors “appears to have had an ever greater contribution to the top line”.
Credit Suisse First Boston, another broker, said: “It is still an exceptional performance, especially in the context of the recent slowdown in the sales growth of both Tesco’s direct competitors and the broader UK retail market.”
Tesco also plans to start selling contact lenses at its in-store pharmacies. It said top brands would be up to 60 per cent cheaper than those sold by other retailers.