Tesco's UK sales slow as consumers cautious

Tesco, the world's fifth-largest retailer, reported a slowdown in its core UK sales in the first quarter and said it expected a "tougher year" as four interest rate hikes make consumers wary.

Britain's biggest supermarket group, where a third of Britons buy their groceries, reported a 4.7 per cent rise in UK like-for-like sales excluding fuel in the 13 weeks to May 26, a slowdown from 5.8 per cent growth in the previous quarter.

Its shares to fell three per cent in early trade after the UK figures came in at the lower end of analysts' expectations.

Tesco, which has operations in 12 countries, said its international sales rose 24.6 per cent at constant exchange rates. Its Chinese business was consolidated for the first time.

Finance and Strategy Director Andrew Higginson said a "little bit" of a slowdown in non-food sales was a main reason behind the slower sales.

It is going to be "tougher year" because of growing caution among consumers after four rate hikes in 10 months, he said. Tesco is still outperforming the market, he added.

"You are going to see a more cautious consumer. Interest rates in particular have had an impact," Mr Higginson said in a telephone interview.