Falling food inflation meant like-for-like sales at Tesco were almost flat in the first quarter of the new financial year.

In the three months to 30 May, the UK’s largest retailer said like-for-like sales were up by 1.1%.

However, much of that was due to VAT returning to 17.5%. Stripping out the increase, sales were up just 0.1% on a like-for-like basis. Including fuel and VAT, group sales for the period were up 8.2%.

The performance comes after Morrisons last month posted a quarterly rise in like-for-like sales of 0.8%, while sales at Asda fell by 0.3%.

Tesco said low food inflation and higher fuel costs had hit restricted sales as consumers were forced to change spending habits. But it claimed strong sales growth in non-food and for its Tesco Finest premium range was evidence of a recovery.

Growth was more robust abroad, with sales up more than 15% in Asia and by 7% in mainland Europe. Sales at its struggling US business rose by more than a third (38%).

Tesco also claimed sales of televisions were up "strongly as a result of our successful World Cup marketing campaign".

"Tesco has made a solid start to the new financial year,” said outgoing chief executive Sir Terry Leahy. “We're making good progress with our strategy: investing in the shopping trip for customers; driving strong productivity gains; growing space and winning market share.”

He added: “The long-term global recovery is well underway and we're in good shape to deliver further growth as the economic environment continues to improve."

Last year Tesco posted record profits of more than £3bn.

Read more
Tesco's Holmes quits a day after Leahy bows out (12 June 2010)
Editor's Comment: He's famed for his small ego, but Sir Terry will leave a big gap (12 June 2010)
Asda sales suffer in ‘disappointing’ first quarter (18 May 2010)
Morrisons’ momentum stalls with slow first quarter (6 May 2010)
Tesco toasts Clubcard success as profits surge by 10% (20 April 2010)

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