UK supermarket giant Tesco said this morning that its performance in the Irish market is "starting to improve", although the market remains " intensely competitive with high levels of untargeted couponing".

Tesco is the biggest retailer in the Irish market, with a 26.3 per cent market share, but its sales have suffered since the arrival of Aldi and Lidl. In the first quarter of 2014, it reported a 5.5 per cent decrease in like for like sales in Ireland.

The statement was made in a quarterly update from the retailer, which showed that the grocer posted the worst quarterly drop in underlying sales in its key home market since chief executive Phil Clarke took the helm in 2011, raising further questions over his trading strategy. Clarke is two years into a multi-billion pounds turnaround plan for its British business which contributes two-thirds of sales and profit for the group, the world's third-largest retailer after Wal-Mart and Carrefour.

Tesco said that sales at UK stores open over a year, excluding fuel and VAT sales tax, fell 3.8 per cent in its fiscal first quarter, hurt by price cuts and a weak food market.

“We are pleased by the early response to our accelerated efforts to deliver the most compelling offer for customers,” said the firm. “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,” it added.

Tesco said total first quarter sales fell 0.9 per cent at constant rates, excluding petrol.

(Additional reporting Reuters)