Tesco shows recovery ahead of AGM today

The UK' largest supermarket chain, Tesco, has shown a marked recovery in its key home market and looks set to move on to a stronger footing, with the expected decline in sales in its first quarter forecasts being not as severe as expected.

According to a trading update today, published ahead of a potentially stormy annual shareholders' meeting later in the day, same store sales were down 1.3 per cent over the 13 weeks to 30 May, the first quarter of its 2015-16 fiscal year.

That compared with the forecasts of analysts of a fall of 1.6 to 3 per cent and came as an improvement on the 1.7 per cent decline recorded in the fourth quarter of 2014-15.

"Whilst the market is still challenging and volatility is likely to remain a feature of short-term performance, these first quarter results represent another step in the right direction," chief executive Dave Lewis said.

The sales drop came in smaller than expected, with analysts, projecting a fall of up to 2.5 per cent at the UK's biggest supermarket chain. It also came in as an improvement from the previous quarter when underlying sales retreated 1.7 per cent in the UK.

According to Lewis, the business was being managed in the right way and at a fundamental level the business was stepping in the right direction.

He added Tesco was getting back to ''being on the side of customers''.

He added, Tesco sales were not increasing 3 per cent faster than its rivals, after it cut prices and reduced product range to focus on stocking more customer favourites. The growth was led by farm products.

Tesco had cut 20 per cent of its product range across 15 areas, including takeaway sandwiches, soft fruit and bakery. Lewis said more ''fundamental'' were set to come.

Improved performance was seen across all of Tesco's international divisions – Ireland, Asia and central Europe and Turkey – once the impact of the currency exchange rate had been excluded.

The stronger than anticipated figure would be seen as a positive for Lewis at the Tesco AGM today where he faces tough questions over the supermarket's weak performance and its generous remuneration for senior executives.