Tesco's UK sales growth has halved in the latest quarter, as households grapple with the economic fallout from the Middle East conflict. The uncertainty surrounding fuel prices and consumer confidence is having a direct impact on discretionary spending, with comparable UK sales increasing by just 1.8% to £13.4 billion between January and May.
This slowdown marks a significant decline from the 4.2% growth recorded in the previous quarter, as well as falling short of City analysts' expectations for a 2.3% rise. Notably, overall group sales remained relatively resilient, increasing by 1% to £16.8 billion, driven in part by an 8.9% surge in online sales.
Chief executive Ken Murphy acknowledged the challenging trading environment, citing the Middle East conflict as a key factor in creating uncertainty for many households. Despite these pressures, Tesco remains committed to offering customers the best combination of price, quality, and service.
The company has expanded its 'Aldi Price Match' initiative to over 2,000 Express stores and introduced 520 new products in response to consumer demands and competitive pressures. This strategic positioning is likely to be key in supporting Tesco's profit expectations for the current financial year, with analysts forecasting a £3.25 billion profit.
However, not all areas of the business are performing well, with sales at Tesco's wholesale arm, Booker, declining by 3.2% due to tough trading conditions faced by independent retailers and catering businesses. Despite an initial share price fall of 2.4%, Tesco remains confident in its ability to navigate these challenges and build on its previous progress.