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UK retailer meets forecasts of 9.7% rise

TESCO Plc, the United Kingdom's biggest retailer, met analysts' forecasts with a 9.7 percent rise in first-quarter sales, led by a strong performance in its international businesses and a rise in sales growth at home.

Finance Director Laurie McIlwee said it was still too early to talk of a recovery in Tesco's markets, but was encouraged that sales growth had returned to non-food products and upmarket brands like "Finest."

"We're still planning on a tough year," he said in an interview yesterday, adding that shoppers were still focusing on the lowest prices.

Sales of Tesco's budget "Value" brand of products were growing around 30 percent year on year, McIlwee added.

Tesco, which employs around 470,000 people in over 4,300 stores in 14 countries, said group sales rose 9.7 percent in the 13 weeks to May 30.

Sales at British stores open at least a year climbed 4.3 percent, excluding fuel and VAT sales tax, up from 3.7 percent the previous quarter and in line with analysts' forecasts.

International sales at the company soared 20.1 percent with a strong performance in Asia offsetting tougher trading in many continental European markets.

"An encouraging statement - their strongest UK performance for many quarters," said Shore Capital analyst Clive Black.

Tesco, which takes almost one in every three pounds spent in a British supermarket, has been losing UK market share for months. It says this is due to shoppers switching to its cheaper products, which has boosted sales volumes but meant that it has not benefited from food price inflation as much as rivals.

J Sainsbury Plc, Britain's third-biggest grocer, is expected today to report a 7.3 percent rise in underlying sales for the 12 weeks to June 13.

McIwee said Tesco was closing the performance gap with its UK rivals and argued that Sainsbury was disproportionately benefiting from shoppers switching out of upmarket food retailers, like Marks & Spencer.


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