Tesco’s billion-pound UK turnaround plan received a fresh setback as the supermarket chain reported another slide in quarterly sales.
Chief executive Philip Clarke, who is overseeing a “refresh” of the business, said the 1.5% like-for-like decline was in line with weaker growth across the whole market.
The group is also facing challenging conditions internationally, with underlying sales sharply lower in Thailand, South Korea and Ireland during the quarter to November 23.
The fall in UK sales was in tune with City forecasts, and comes after a flat performance in the previous three months.
When including increases in store space, the sales figure increased 0.9% compared with the same period last year.
Tesco said it was continuing to execute its overhaul strategy in a difficult market, and highlighted the considerable pressure on household budgets.
“Consumers are still managing the effects of an unprecedented period of declining real incomes and a higher cost of living. The average spending power of a typical UK household is around 10% below its 2007 peak, in real terms,” it said.
Mr Clarke said the grocery market had become “more challenging for everyone” since the summer, with the third-quarter performance reflecting this trend.
He said recent changes to the business, such as the relaunch of its Finest range and the refurbishment of more than 100 stores, had been well-received by shoppers.
Its online business has also recorded a record level of grocery orders.
The retailing giant’s interim profits tumbled by almost a quarter to £1.39 billion in October, after underlying sales falls in the UK and every one of its overseas markets.
As well as the squeeze on household spending power, Tesco has been hit by the expansion of rivals in the discount sector.
Last week, Lidl said its like-for-like sales were growing at around 18% as it set out plans to more than double its 600-strong UK estate.
Last month Asda said its sales had grown 0.3% during the 13 weeks to early October, while Sainsbury’s revenues rose 1.4% in the 28 weeks to the end of September.
Tesco said it remained on track to meet forecasts for the financial year.
However, Shore Capital retail analyst Clive Black believes that the supermarket is six to nine months behind the targets he set for the business in February.
“We still support the strategy, [and] encourage management to keep focused upon improving the performance of its existing store estate whilst constraining capital expenditure on new stores and building out its online and digital capability,” he added.
Meanwhile, sales at Tesco Bank increased by 0.9%.
Current accounts are set to be launched early next year.