Tesco has reported falling sales in the third consecutive quarter as it suffers competition from leading discounters.

Like-for-like sales including VAT and excluding petrol fell by 3.7% in the three months to 24 May with group sales for the company as a whole down 0.9%. 

The supermarket, along with Asda, Sainsbury’s and Morrisons, has responded to the threat of discounters Aldi and Lidl by slashing the prices of staple foods such as bread, milk and eggs. The ploy is starting to take effect, with volumes of the essentials rising 28% in the quarter.

Chief executive Philip Clarke said trading would remain challenging and results were in line with expectations, despite the reduction in targeted promotions. Tesco reported a 6% fall in annual profits in April.

“We are pleased by the early response to our accelerated efforts to deliver the most compelling offer for customers,” said Clarke. “We expect this acceleration to continue to impact our headline performance throughout the coming quarters and for trading conditions to remain challenging for the UK grocery market as a whole.”

More than 100 stores were refreshed in the first quarter, contributing to the Q1 performance, with 200 more to be refreshed by the end of the first half.