Horse meat scandal hits Tesco as sales fall 1pc
SUPERMARKET giant Tesco was left counting the cost of the horse meat scandal as it revealed falling UK sales after a slump in demand for frozen and chilled convenience food.
The group posted a 1pc fall in UK like-for-like sales in its first quarter following a "small but discernible impact" from the horse meat crisis after it was forced to withdraw four products.
Tesco said it was also suffering from continuing woes in its general merchandise division, with the sales slip marking a reversal in recent improvements following a 0.5pc bounceback in sales at the end of its financial year.
But the chain insisted its turnaround plans were on track and promised a relaunch of its non-food ranges, starting in smaller stores in the coming months followed by a company-wide overhaul later in the the year.
It added sales of frozen and chilled convenience meals had picked up in recent weeks.
Tesco said the horsemeat impact was "well behind it now" after completing nearly 1,500 tests on its own-brand meat ranges and finding new suppliers for the four products affected, which have since been relaunched.
But it admitted general merchandise sales would remain in the red for the remainder of the year, with a recovery in non-food sales not likely until next year.
Tesco is pulling out of unprofitable consumer electronics products, which it said "take up a lot of space and don't make much money".
The group's international business also suffered in the quarter to May 25, with sales falling across Asia and Europe.
Today's first-quarter figures will heap more pressure on chief executive Philip Clarke as he seeks to improve trading after recently reporting the group's first annual profits fall in nearly 20 years, down 51.5pc to £1.96bn (€2.34bn).
He said the move to shift away from consumer electronics products was expected to have a big impact on sales, but was "all part of the plan".
Shares fell around 2pc as analysts described the sales performance as "disappointing".
Mike Dennis, analyst at Cantor, said Tesco had lost market share and "will need to show that a move to small stores and better use of hypermarket space can rebuild sales growth".