Tesco logs rising Q1 group sales

Britain's biggest retailer Tesco on Wednesday posted a modest increase in first-quarter group sales, but suffered a much weaker performance in its home market in a setback for the supermarket giant's turnaround plans. Sales including petrol climbed 1.8 percent in the 13 weeks to May 25, compared with the same period a year earlier, Tesco said in a trading update. British sales including petrol gained just 0.1 percent. However, sales sank 1.0 percent on a like-for-like basis, stripping out the impact of new floor space, and excluding petrol and VAT. Tesco blamed the British performance on poor sales of general merchandise and the ongoing impact of the horse meat scandal, which has hit sales of frozen foods and ready-made meals. And it warned that trading conditions outside Britain were still "challenging" and not expected to improve in the near term. "Conditions outside the UK remain challenging and we have broadly maintained our performance from the fourth quarter of last year," the group said. The group added that its plans to exit the United States market were still on track. Back in April, Tesco announced that it would exit its failed US division Fresh & Easy, as it unveiled the first drop in annual profits in almost two decades. Tesco was also hit hard last year by a costly investment plan that was aimed at turning around its domestic business in Britain. In early morning deals on Wednesday, Tesco shares sank 2.14 percent to 356.65 pence on London's FTSE 100 index of leading shares, which was 0.66 percent lower at 6,515.08 points. "Tesco is in a bit of hot water Wednesday after the supermarket reports a slide in sales for the first quarter," said ETX Capital analyst Joe Rundle. "UK sales fell 1.0 percent for the period, worse than the 0.70-percent drop expected by the market. "Putting the Europe to aside given the challenging conditions in the beleaguered eurozone economy, the slide in UK sales is more worrying for investors."