Tesco Like-for-Like Sales Growth Slows to 2%

Tesco, Britain's biggest retailer, said underlying third-quarter UK sales growth had slowed to 2.0 percent even though new "Discounter" products had drawn in an extra 300,000 customers a week.

"We are pleased with our progress but we are also realistic. The current economic climate, and the strain this is putting on consumers everywhere, is something that all businesses are feeling," Chief Executive Terry Leahy said on Tuesday.

Leahy said that by giving customers "more affordable choices, we have deflated our British sales during the quarter by between two and three percentage points".

The supermarket group, which employs 440,000 people in about 4,000 stores across 14 countries, also said total sales rose 11.7 percent in the 13 weeks to Nov. 22, including a 28.1 percent rise in sales from its international businesses.

Analysts had forecast a 1.9 percent rise in UK like-for-like sales excluding fuel, according to a Reuters poll of 13, with estimates ranging from 1.1 percent to 2.5 percent.

Tesco, the world's third-biggest retailer, has been losing market share to rivals such as Asda and Wm Morrison in its main UK market, due in part to its greater exposure to non-food sales, which have been hit harder than demand for groceries in the economic downturn.

Some of the pain has also been self-inflicted as customers switch to a cheaper discount brands range which Tesco launched in September to counter the strong growth of hard discounters like privately-owned German groups Aldi and Lidl.

Wal-Mart's Asda, Britain's second-biggest grocer, posted a 6.9 percent rise in same-store sales excluding fuel for the three months ended Sept. 30, while number three J. Sainsbury reported a 4.3 percent rise for the 16 weeks to Oct. 4.

Tesco shares have fallen about 40 percent over the past year, hitting a four-year low of 283.80 pence last month.

They have underperformed the DJ Stoxx European Retail Index by 2 percent this year and closed at 288 pence on Monday, valuing the group at about 23 billion pounds ($34 billion).

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