Tesco has not altered sales forecast

Tesco, Britain's biggest retailer, said it had not altered its UK sales forecasts but that it was concerned about the "depth and longevity" of an economic slowdown in its domestic market.

The Financial Times reported that Tesco was now budgeting for underlying UK sales growth of two per cent this year, down from a target of three to four per cent. The newspaper cited comments earlier this month attributed to Tesco Finance Director Andrew Higginson by brokerage Shore Capital.

The supermarket group, which serves more than 20 million Britons a week, said it had made no official alteration to its UK sales targets but was cautious given the slowing British economy.

"With the current uncertainty about the potential depth and longevity of a downturn, it is only prudent to consider and plan for any eventuality," Tesco spokesperson Nikki Martin said. "We have not changed what we're looking at and have not even started our budget process yet."

Tesco's concern reflects its belief that shoppers are trading down to budget chains such as Aldi and Lidl as consumers curb spending amid higher food and fuel costs, and economic uncertainty exacerbated by the collapse of several major banks.

"We're not talking about guidance here, what we're saying is that Tesco is looking at the UK economy and sees a more cautious environment. It's now about how they set their business up for the next year or two, which will be tougher times than usual," according to Shore Capital analyst Clive Black.