Tesco sees slowest Christmas sales growth since 1990s

By Mark Potter

LONDON (Reuters) - Tesco reported the smallest rise in Christmas sales at UK stores open at least a year since the early 1990s, as the country's biggest retailer felt the impact of the economic downturn.

However the supermarket chain, which takes about one in every eight pounds spent in British shops, said on Tuesday it was growing market share across a range of non-food items, including electricals, clothing and entertainment as shoppers desert specialist retailers in search of the cheapest prices.

Sales at stores open for at least a year, excluding fuel, rose 2.5 percent in the seven weeks to January 10.

That was an acceleration from the 2 percent growth reported for the 13 weeks to November 22, and just above an average forecast of 2.4 percent in a Reuters poll of nine analysts. Estimates ranged from 1.7 percent to 3.0 percent.

Dealers said the shares are expected to rise by as much as 2.2 percent at the opening.

Group sales were up 11.6 percent, boosted by 32.7 percent growth in international sales. Tesco employs 440,000 people in about 4,000 stores across 14 countries.

Tesco said adjusting for the reduction in VAT sales tax, which came into effect in early December, growth on a comparable basis was 3.5 percent.

Britain's retailers are struggling as shoppers curb spending amid rising unemployment, sliding house prices and fears of a deep recession.