LONDON (ShareCast) - (Sharecast News) - UK supermarket chain Tesco said it was seeing early indications of changing customer behaviour as a result of the cost-of-living crisis and inflationary environment as it reported a fall in first quarter sales, but maintained annual guidance.
The company on Friday said UK like-for-like sales for the three months to May 28 fell 1.5% year on year to £9.8bn. On a group basis sales were up 2%, boosted by a strong performance at its Booker wholesale division, where revenue rose 19.4% to £2bn.

"At this early stage in the year, our guidance ranges for profit and cash remain unchanged," the company said.

"Although difficult to separate from the significant impact of lapping last year's lockdowns, we are seeing some early indications of changing customer behaviour as a result of the inflationary environment," said chief executive Ken Murphy.

He added that there were signs that shoppers were starting to shift their spend towards its cut-price ranges, particularly on basics such as bread, beans and pasta, where inflation has been high, in order to save money.

"Customers are facing unprecedented increases in the cost of living and it is therefore even more important that we work with our supplier partners to mitigate as much inflation as possible," he said.

The UK's largest supermarket said it had gained market share from the other "big four" chains - Asda, Morrisons and Sainsbury's, but Murphy warned that the market environment "remains incredibly challenging".

Customers spent 14.5% less online and 0.7% less in the chains major stores, but 6.2% more in its convenience stores. Tesco said the biggest fall in sales was in clothing and general merchandise, such as homewares and toys, while the decline in the volume of goods sold was partly offset by inflation.

Fuel sales remain down on pre-Covid pandemic levels as the oil price pushes the price of petrol to record levels. Murphy said Tesco "continues to price fuel very competitively in the middle of the market".

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