• H1 trading profit up 3.7% to GBP1.7bn
  • Sales up 8.8% to GBP35.5bn
  • General merchandise sales up 2.8%

Supermarket retailer Tesco today (5 October) reported first-half growth in its general merchandise categories - which includes clothing - despite "subdued demand" for discretionary items in some of its larger markets.

But it admitted this "growth has been challenging to achieve".

While general merchandise sales rose 2.8% in the six months to 27 August to reach GBP4.8bn (US$7.4bn), like-for-like declines across the channel widened to 4.8% from a 3.3% drop in the same period last year.

In the UK, general merchandise, clothing and electricals were down 0.9% year-on-year, which it said "reflects the challenging environment". It also attributed the declines to the addition of less new selling space this year.

The company plans to strengthen the performance of these categories in the UK, with improved ranges, merchandising, pricing and promotions beginning to come through. "Further, more substantial changes to product ranges, category emphasis and space allocation in stores will be implemented during the second half," it added.

In contrast to poor UK sales, international growth helped Tesco boost first-half profits.

In Central Europe, clothing sales rose 11% at constant exchange rates, reflecting the "strength of the F&F brand and also the particularly strong performance of clothing in our reformatted Extra hypermarkets".

In Asia, there was also "strong general merchandise sales growth", with high-single digit growth in hardline and softline sales. The retailer also singled out "very good" category growth in homewares, toys, children's clothing and fashion accessories".

Overall, first-half trading profit was up 3.7% to GBP1.7bn, as sales rose 8.8% to GBP35.5bn. Excluding petrol, sales were up 8.2%. Underlying profit before tax was up 6.2% to GBP1.9bn. Group operating profit increased 12.1% to GBP1.8bn.

UK trading profit was up 4.5% to GBP1.2bn, while sales increased 7.1% over the period. The retailer admitted that UK like-for-like sales were weak, and were not helped by "subdued market demand in non-food categories, especially electronics and entertainment," which are two of its largest product groups. Over the half, like-for-like sales fell 0.5%, with a reduction of 0.9% in the second quarter.

Tesco's share price was up 0.67% to 382.65p a share at 9:39 BST today.