Britain's biggest retailer Tesco posted a 2 per cent rise in underlying third-quarter UK sales and said new discount products had drawn an extra 300,000 customers a week to its UK stores.
News of the early success of Tesco's discount brands range eclipsed confirmation that the supermarket group's third-quarter underlying UK sales growth was the lowest since the early 1990s.
Tesco shares, which sank to a 4-year low last month, jumped as much as 7.5 per cent to 309-1/2 pence in early trading today.
Britain's retailers are slashing prices in a bid to attract shoppers hit by sliding house prices and fears of unemployment. The pain has been too much for some, with sweets-to-DVDs chain Woolworths falling into administration last week.
"The outlook for next year looks fairly sobering," Tesco finance director Andrew Higginson said. "I think it's going to be a very tough year in the consumer economy."
Tesco, which employs 440,000 people in about 4,000 stores across 14 countries, said it would cope by cutting an extra £90 million ($134 million) of costs this financial year to take total planned savings to £540 million.
It will also restrict capital spending to less than £4 billion next year from around £4.5 billion this year and ask suppliers to "play their part," Mr Higginson said in a telephone interview, without elaborating.
Tesco, the world's third-biggest retailer behind US group Wal-Mart and France's Carrefour, said UK like-for-like sales excluding fuel rose 2 per cent in the 13 weeks to November 22nd, just above an average forecast of 1.9 per cent in a Reuters poll of 13 analysts.
That was down from 4 per cent in the second quarter and the slowest growth for any reporting period since the group's annual results for 1992-93, though it is only in recent years that it has posted quarterly numbers and a sales figure excluding fuel.
Tesco said the number was affected by the success of the discount brands range, which it launched in September to counter the strong growth of hard discounters, such as privately-owned German firms Aldi and Lidl.
At 10.01am shares in Tesco were up 6.3 per cent at 306.4 pence on the Ftse100.
The supermarket group, which employs 440,000 people in about 4,000 stores across 14 countries, said total sales rose 11.7 per cent in the 13 weeks to November 22nd, including a 28.1 per cent rise in sales from its international businesses.
Tesco, which runs more than 3,700 stores in 13 countries is the largest retailer in Ireland with 112 stores employing 13,500 people. It does not provide detailed figures for its Irish division, rather includes them under international sales.
In the third quarter international sales were up 28.1 per cent at actual exchange rates and by 14.6 per cent at constant rates. Tesco plans to open 16 new stores in Ireland by the end of its February 2009 as part of a €150 million expansion.
Agencies