Sales at Tesco's Booker wholesale arm fell in the latest quarter, with weaker demand from independent retailers and catering businesses reflecting continued pressures on the high street.
The decline came as Tesco said the conflict in the Middle East had created "ongoing uncertainty for many households", contributing to a sharp slowdown in UK sales growth.
Despite the drop, Tesco stated Booker saw “further progress in customer satisfaction scores including price, speed and availability [alongside] 146 net new retailer partners added in the quarter”.
The UK’s biggest retailer said comparable sales rose 1.8% to £13.4bn in the three months to the end of May, below both the 4.2% reported in the previous quarter and the 2.3% growth City analysts had expected.
The numbers were, however, lifted by an 8.9% rise in online sales and group sales rose 1% to £16.8bn.
Ken Murphy, Chief Executive, said, "I am pleased with our progress in the first quarter, with customer satisfaction up strongly and continued sales growth building on the exceptional performance we delivered last year. With the conflict in the Middle East creating ongoing uncertainty for many households, we remain focused on giving customers the very best combination of price, quality and service.
"We extended Aldi Price Match to over 2,000 Express stores during the quarter, helping customers benefit from great value wherever and however they shop with us.
"We are also investing in innovation and quality, with over 520 new and improved products launched during the period, including our largest ever Finest deli transformation and a further expansion of our Tesco High Protein range."
Commenting on Tesco's trading update, Eleanor Simpson-Gould, Senior Retail Analyst at GlobalData, said, "UK food sales rose 2.6%, with Tesco’s premium own-brand strength continuing as its Finest range delivered 9.0% growth, suggesting consumers are still willing to trade up for quality despite tightening budgets.
"Importantly, this growth is not just price-led; it reflects Tesco defending key-item prices through a deliberate blend of value and premium products and range strategy.
"....in a slowing market, adding more new lines will not be enough to compel spending and volume uplift. Sharpening differentiation through superior fresh-produce quality, online and rapid-delivery capabilities will translate into a clearer reason to choose Tesco over discounters.
“The World Cup now provides a timely demand catalyst, providing a much-needed seasonal boost across beer, snacks, food-to-go and easy entertaining. Tesco’s priority must be to improve availability and price perception on key match-night staples, while utilising its Finest range to defend margins and differentiation compared to discounters.”
ENDS