Tesco records drop in UK quarterly sales as it faces challenge from discounters

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TESCO, Britain’s biggest retailer, has recorded its worst quarterly UK sales drop in 40 years, raising questions over whether it can cope with the rise of discounters such as Aldi and Lidl.

One analyst called on investors to consider whether Tesco, which has dominated the market for years, was past its sell-by date.

The retailer posted a 3.7 per cent drop in like-for-like sales for the first quarter to May 24 as it faced intense competition from discount rivals and a squeeze on household budgets.

It was the third quarter in a row of worsening falls and chief executive Philip Clarke, who is in his 40th year at the store after working his way up from the shop floor, warned there was no prospect of an end to the gloom any time soon.

He said: “There hasn’t been a quarter of like-for-like sales like this before that I can remember, but I’ve never seen a period of such intense transformation for the industry.”

Tesco, like its rivals, is facing a squeeze from discounters Aldi and Lidl, and the latest industry figures show its market share has declined. It has responded by investing in price cuts on “the products that matter most” - and Mr Clarke said sales volumes had risen 28 per cent in these areas, with more cuts to come. The retailer is also in the middle of a “refresh” programme to update stores.

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