Tesco reported a slowdown in sales in the first quarter as households cut back on spending in the face of ‘ongoing uncertainty’.

Britain’s largest supermarket chain reported a 1.8 per cent increase in UK like-for-like sales in the 13 weeks to 30 May, undershooting forecasts of 2.3 per cent and growth of 3.1 per cent in the previous quarter.

Boss Ken Murphy flagged the Iran war as ‘creating ongoing uncertainty for many households,’ but pointed to the ‘continued sales growth’ in the first quarter.

Despite increasing its market share over the quarter, Tesco is facing heightened competition from discounters as households slash spending. In April, it extended its Aldi Price Match to over 2,000 Express stores.

In the same month, boss Ken Murphy said the Iran war had created ‘further uncertainty’ in the group’s outlook for the year but would do ‘whatever we can’ to keep food prices down.

The grocer maintained its cautious forecast this morning, expecting to deliver adjusted operating profit of between £3billion and £3.3billion for the year to the end of February 2027. 

In this morning’s update to investors, the London-listed grocer flagged the ‘exceptionally strong’ comparative performance in the first quarter last year, when sales rose 5.1 per cent, boosted by favourable weather.

Tesco has built its market share to over 28 per cent, according to Worldpanel, as it takes the fight to German discounters Aldi and Lidl. ‘We remain focused on giving customers the very best combination of price, quality and service,’ said Murphy.

Richard Hunter, head of markets at Interactive Investor said: 'Any progress comes alongside not only ferocious competition but also pressure on increased costs, while maintaining lower prices also comes with an inevitable impact on margins and revenues.' 

At the same time, Tesco has doubled down on its ‘Finest’ range, which saw quarterly sales jump 9 per cent after the launch of over 220 new lines.

Garry White, Chief Investment Commentator at Charles Stanley, said: ‘Tesco’s first-quarter update pointed to solid, if unspectacular, trading, with the group continuing to demonstrate resilience in a highly competitive market.

‘Its ability to maintain market share is notable given ongoing pressure from discounters and increasingly price-sensitive consumers, keeping the focus firmly on value and promotions.’

Tesco shares opened 3.42 per cent lower at 441p.