LONDON (Bloomberg) – Tesco Plc, the UK's largest supermarket chain, said a lack of domestic revenue growth in the first quarter won't stop it meeting full-year forecasts.

Sales at UK stores open at least a year will still gain three percent, excluding gasoline and value-added tax, after rising 0.1 percent in the 13 weeks ended May 30, Finance Director Laurie McIlwee told reporters on a conference call yesterday.

An acceleration of food-price inflation and reduced concern among consumers about the British budget and new coalition government will help sales as the year progresses, he said.

UK food inflation slowed to 1.4 percent in the three months through May 16, having reached nine percent in February 2009, according to Kantar Worldpanel. That eroded sales growth at Britain's supermarkets, which are also contending with weaker consumer spending. Tesco's same-store sales growth slowed from 2.7 percent in the second half of the previous year.

"The UK performance was expected and should be the low point of the year," Chris Hogbin, an analyst at Bernstein Research said. "We also expect international performance to accelerate." Hogbin has an "outperform" rating on the shares.

Tesco rose 8.25 pence, or 2.1 percent, to 399.9 pence at lunchtime in London trading yesterday, reversing earlier losses. The stock has declined 6.6 percent this year, compared with smaller competitor J Sainsbury Plc's 0.1 percent gain.

Tesco, which announced last week that Phil Clarke will replace Terry Leahy as chief executive officer, foresees a "steady consumer recovery" in the UK, McIlwee said.

The first-quarter performance was "slightly off the group's growth rates, but still solid", he said.