TESCO SALES UP DESPITE UNCERTAINTY

Excluding petrol, Tesco grew UK like-for-like sales by 3.5% - in line with management forecasts and City estimates.

Chief executive Sir Terry Leahy said: "Core food categories showed good growth as we helped customers spend less at a time when household budgets are becoming stretched."

Sir Terry said the company had made a "solid start" in the UK, although non-food sales growth slowed as consumers took a more cautious approach to spending.

At the time of the retailer's April annual results Tesco said same-store sales were running above 4%, although this eased back as the firm faced competition from the likes of Asda, Sainsbury's and Morrisons. Recent supermarket market share figures have shown customers looking to save on household bills flocking to discount stores such as Lidl and Aldi.

Tesco's finance director Andrew Higginson said discounters were "having a moment in the sun", but added that the grocer's 3.5% same-store sales growth was "by any definition a good number".

Mr Higginson said non-food sales growth had slipped behind food "for the first time in a long time" as shoppers cut back on bigger ticket items such as furniture.

But despite the slower pace of non-food growth, Tesco said it was still outperforming the wider market and gaining market share.

Mr Higginson remained upbeat despite the gathering economic gloom, saying: "Employment is still pretty full and at this stage we are seeing consumers prepared to spend where they see value."

Including petrol - which has soared in price during recent weeks as the cost of oil reaches all-time highs - like-for-like sales were ahead 6.4% in the three months to May 24, Tesco said.