British retail giant Tesco said Wednesday its sales dropped by 1.5 percent year-on-year in the third quarter of this year blaming a weaker grocery market.

Tesco said in a statement the decrease in sales was due to the effects of an unprecedented period of declining real incomes and a higher cost of living for consumers. It said the average spending power of a typical British household was around 10 percent below its 2007 peak in real term.

In the home market, Britain sales at stores open for at least one year and excluding VAT sales tax and petrol, declined by 1.5 percent.

Internationally, like-for-like sales in Asia dropped 5.1 percent in the third quarter, but the performance in Europe as a whole improved slightly compared with the previous quarter, posing a growth of 4 percent year on year.

However, total sales of Tesco, which is the third largest retailer in the world after French Carrefour and the U.S. Wal-Mart in term of annual sales, rose by 0.9 percent in the third quarter.

"Continuing pressures on UK household finances have made the grocery market more challenging for everyone since the summer and our third quarter performance reflects this," said chief executive Philip Clarke.

He added: "Overseas, the near-term trading environment also remains tough, most notably in Thailand, but we have been able to drive a better performance in Poland and Turkey."

The retailer pledged to make further progress in its recovery strategy, including upgrading 108 more stores. Endi

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