Tesco sales slow as consumer squeezed

By Rachel Sanderson

LONDON (Reuters) - Tesco (TSCO.L) said its first quarter like-for-like sales excluding petrol in its core UK market rose 3.5 percent, slower than at the start of the year as clothing and furniture sales were hit by a consumer squeeze.

Tesco shares fell more than 2.6 percent to 391.2 pence in early trading, underperforming a 1 percent fall in the DJ Stoxx index of European retailers .SXRP.

Group sales at the world's third largest food retailer rose 13.7 percent in the 13 weeks ended May 24 and its international business grew by 26.6 percent at actual exchange rates.

Finance and Strategy Director Andrew Higginson said growth in the core UK market, where Tesco is the nation's biggest retailer, was a "very good solid number", although it slowed from 4 percent growth in the first five weeks of the year.

Tesco has forecast 3 to 4 percent growth for the full year.

Still, "clearly the consumer is squeezed and being very cautious," Higginson told reporters.

"We are seeing non-food growing less than food for the first time in a long time. Some of the big ticket items, like furniture, are a bit slower than we would have liked," he said.

Shore Capital analyst Clive Black said overall Tesco's update was a "good statement" with international sales particularly strong.