Tesco’s sales were hit over Christmas by the collapse of wholesaler Palmer & Harvey.
The demise of P&H, which cost 2500 jobs, hit the multiple at a crucial time and “took the shine” off decent festive trading, chief executive Dave Lewis said.
He commented: “We were their largest customer and they did quite a lot of work for us — tobacco, fresh and frozen food.
“It was an important part of our logistics operation and it’s extremely unfortunate what happened in November. It brought complex challenges in what is our busiest time of the year and it was hard to recover as we made those changes.”
Tesco had record-breaking sales in the four weeks to Christmas Day and same-store sales increased 2.3% in the 19 weeks to January 6.
But a sales growth of only 1.9% over Christmas was not enough to impress the City.
The shares were down 4%, or 8.2p, at 203.7p. Analysts had been predicting an increase of up to 3.2%.
The news follows Morrisons and Lidl posting strong results.
Lewis warned this year may be tough as shoppers seek to save money.
He said: “We’ve seen consumer sentiment has changed. We’re thinking: how can we make an offer that’s beneficial for shoppers when they’re thinking how they can make their money go a little further?”
Bryan Roberts, of retail consultancy TCC Global, commented: “Despite many predictions that Tesco had ‘won’ Christmas, that accolade is instead being shared by Morrisons and the Co-op.”
However, George Salmon, an analyst at fund firm Hargreaves Lansdown, believes Tesco’s fortunes may improve as it recovers from the collapse of Palmer & Harvey.
Salmon added: “Underlying sales momentum is building. Third-quarter UK like-for-like sales growth is higher than has been reported for some time. Some of this is being driven by food price inflation, although Tesco’s strength relative to its suppliers means it’s passing on fewer price increases than its competitors.”
Tesco has maintained its profit outlook for the full year.