Top retailer Tesco said yesterday same-store sales excluding fuel grew 6.8 per cent in the first quarter in what the company described as a tough and slowing market.
Finance director Andrew Higginson told Reuters in an interview he expected a modest slowdown in consumer demand even as the supermarket group furthers its relentless gains in market share.
Total group sales in the 12 weeks to May 21 rose 14.6 per cent, the company said. Including fuel, same-store sales were up 8.8 per cent, driven by strong volumes and higher petrol prices.
Excluding fuel, like-for-likes sales growth slowed to 6.8 per cent from the adjusted figure of 6.9 per cent for the fourth quarter of last year.
The numbers were slightly ahead of analysts' forecasts, which had pegged the same-store figure at around six per cent excluding petrol, and total group sales growth at between 10 and 12 per cent.
But Mr Higginson said the growth trend in the UK was easing slightly, confirming that even the market leader is feeling the effects of a broad-based softening of consumer sentiment.
"We do expect the numbers to come off a bit as the year goes on, just because we were up against such tough comparatives last year, and I think the consumer has slowed a little bit. A modest slowing is possible from here on," he said.
Even so, the recent spell of very warm weather is helping offset some of the underlying weakness of the market, he added, with particularly strong sales of barbecue foods, salads, beer and wine.
The numbers confirmed that Tesco is once again accounting for virtually all the growth in the grocery market, currently around three per cent on an annualised basis.
Same-store sales at Wal-Mart's Asda are thought to be pretty much flat, while No. 3 player J Sainsbury posted like-for-like sales growth of 1.3 per cent for the first quarter, excluding fuel.
"They look better than what we and the market were going for," said one London-based analyst at a leading brokerage.
"I guess we're disappointed that the shares haven't done much this year, but figures yesterday from Sainsbury will allow the market to compare and contrast. We still think Tesco is the one to go for," the analyst said.
Broker Numis upgraded its target price on the share to 340 pence from 320 pence, but maintained its "hold" recommendation on the argument that everyone in the market was positive on the share already. (Reuters)
Shares in Tesco, which have outperformed the food retailers' benchmark index by almost nine per cent in the past 12 months, eased slightly to stand at 317-1/4 pence by 0835 GMT, valuing the company at about £23 billion.
Tesco's growth also means that it is taking market share, confirming figures from research firm TNS which earlier this month put Tesco's market share at 29.9 per cent in 12 weeks to May 22, up from the month-earlier figure of 29.8 per cent.
Mr Higginson said his group was continuing to make inroads across the board, and not least from fourth-largest market player Wm Morrison Plc, which is struggling to integrate the Safeway chain it bought last year.
"At the moment we're picking up trade from most people," Mr Higginson said. "Morrisons is having a particularly torrid time."
The company also announced it was to begin selling low-priced contact lenses in its UK stores, the latest move in a process of diversification that has seen Tesco move into mobile telephony, financial services and home entertainments.
As the supermarket giants use price cuts to slug it out on a murderously competitive market, price deflation has become a serious growth inhibitor - in Tesco's case, slicing 1.8 percentage points from UK same-store growth.
"We've got very strong deflation in the core business. I don't think there is an end to price cuts. We keep pressing on and that's our core business," Mr Higginson said.
International sales - which account for about 20 per cent of the group total - rose 27.8 per cent, or 19.9 per cent at constant exchange rates.
This growth rate, which accounted for a good proportion of the company's 14.6 per cent increase in group sales, shows no sign of abating, the finance director said.