Tesco, the UK's largest retailer has reported lack lustre trading figures for the crucial Christmas period. The company has said that it is "disappointed" by its performance and suggested that it's Big Price Drop campaign had not been the success anticipated.

In the UK, total sales including VAT and petrol grew by 3.8% and by 1.7% excluding petrol. Net new space performed well, contributing 3.0% growth, but like-for-like sales growth – at (1.3)% including VAT and excluding petrol – was below Tesco's expectations.

In it's statement, the supermarket chain cited the highly promotional market as the key factor in the unsuccessful Big Price Drop scheme. 

"In a highly promotional market, the volume response to our increased investment into lowering prices did not offset the deflation it has driven,” it said.

Online sales were strong in both food and non-food with total online sales growth of more than 14%. Approaching one million orders were placed with Tesco Direct during the period, of which over two-thirds were collected in store.

Tesco said it was "pleased" with its international performance. Total international sales over the period grew at 8.2% (5.0% at actual exchange rates), with strong performances in all three regions: Asia, Europe and particularly the United States. Group sales in the six weeks to 7 January 2012 increased by 5.2% including petrol (4.2% at actual exchange rates) and by 4.0% excluding petrol (2.9% at actual exchange rates).

Looking forward the retailer said: "In a challenging consumer environment at home, and with early signs of more cautious behaviour emerging elsewhere, we have seen more strain than anticipated on our profitability during the important seasonal trading period. 

"As a result, while underlying profit before tax and earnings per share for 2011/12 will be broadly in line with market consensus forecasts, we expect Group trading profit growth to be around the low end of the current consensus range.

"Our plan for 2012/13 now reflects substantially increased investment to deliver an even better shopping trip for customers – particularly in the UK. Consequently, we anticipate minimal Group trading profit growth for the year.

"An important element of our plan for 2012/13, as we signalled at our Interim Results, will be reduced levels of capital expenditure as we modify our approach to UK expansion."