Total sales in Tesco supermarkets have dropped in the first quarter of 2019, as the chain struggled to match last year’s hot summer and uplift from the royal wedding.
The supermarket giant reported total UK sales growth was down 0.8% in its latest results, but said it had outperformed the grocery market.
Tesco shares fell 2% in morning trading as the results left investors disappointed on Thursday.
The firm said its slight rise in like-for-like UK sales of 0.4% had outperformed the UK grocery market, but they lagged behind analysts’ expectations of 0.8%.
Tesco total sales dipped to £9.08bn ($11.5bn) in British stores, though they were up 0.4% across the group, including sales abroad, to £13.98bn in the first quarter.
It performed best on prepared foods such as ready meals, bakery and dairy, and reported a strong Easter in 2019 with its biggest-ever sales in small stores on Easter Sunday.
Online sales also performed strongly, up 7% year-on-year with a rise in use of its Click & Collect offer.
Dave Lewis, chief executive of Tesco, said: “We have had a strong start to the year, growing ahead of the UK market on both a volume and value basis.”
Bruno Monteyne, an analyst at Bernstein and former Tesco executive, said the figures suggested “either new price cuts by Tesco, or more likely a strong shift to the new discount brands,” such as the ‘Exclusively at Tesco’ range.
But the decision to close Tesco Direct also hit sales growth.
The overall grocery market has grown relatively modestly this year, according to figures released last month from market research firm Kantar.
The whole sector saw growth of 1.3% in the three months to 19 May, compared to 2.7% a year earlier.
Chris Hayward, consumer specialist at Kantar, said at the time sales of beer, ice cream and sun cream all dipped significantly in May compared to the previous year as cooler weather hit spending.
"This time last year we experienced the hottest May since records began and enjoyed major events like the royal wedding and FA Cup final - so we would expect this period to be challenging for all grocers when comparing year-on-year performance,” he said.
Michael Hewson, chief market analyst at CMC Markets UK, said the figures were a reminder the “tough retail environment” could keep dragging down profits for the next few months.
The rise of Aldi and Lidl has been eating into the big supermarkets’ market share, with Lidl announcing further expansion on Wednesday with 40 new London stores planned.
He said the latest results called into question Tesco’s chances of hitting its full-year revenue target of £65bn.