Image copyright Getty Images Image caption Tesco sales have benefited from falling prices

Supermarket giant Tesco has shrugged off a “supply crisis” in its third quarter, its latest update shows.

The supermarket saw overall sales rise 9.8% in the UK, compared with the previous year, as lower prices, warm weather and promotions continued to benefit consumers.

Much of that was down to price cuts, but analysts said it was doing its job by offering consumers different ranges of food.

Tesco has also faced mounting pressure over its accounts.

‘Fuel inflation’

Some analysts warned that prices would have to fall further to help consumers, but that they were already falling in Britain.

“There is a lot of fuel inflation, even at the moment,” former Tesco director Paul Flynn told the BBC.

Tens of thousands of people queued for hours at its stores to join the queue for its Black Friday promotion earlier this year, despite the stock shortages.

Mr Flynn said: “How can these retailers not pass on reductions that are inevitable?

“Suppliers are being forced to take all the price cuts that the retailers are taking.”

Annual profit for Tesco fell back to £1.6bn last year, from £2.2bn the year before.

The firm blamed falling sales in its home market, where its value is down 20% over the past three years, for a 22% fall in profits in its key international markets.

The firm has been remodelling its stores, which have struggled to compete with warehouse-based rivals like Aldi and Lidl.

Rivals also lost out to Tesco last year, with Waitrose’s UK sales up 3.3% and Sainsbury’s up 2.7%, beating its two main rivals, which both saw annual sales fall.

Shares in Tesco were trading 5% higher, or 37.3p at 477.2p, on Friday afternoon.

Tesco’s UK chief executive Dave Lewis said: “What we are seeing is that people are still coming out to shop at Tesco and seeing value and value on offer for the first time in two years.

“We’ve got the most competitive prices in the market so we’re winning again.”