Tesco, Britain's largest retailer by revenue, says it struggled at home during the third quarter as consumers continued to feel the pinch.

The company says Wednesday that its same-store sales in its U.K. stores — excluding fuel and sales taxes — fell 1.5 percent. Chief Executive Philip Clarke says the drop comes as consumers face "an unprecedented period of declining real incomes and a higher cost of living," with average spending power around 10 percent below its 2007 peak.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, says competition at both ends of the price range remains intense, but progress is being made as the company revamps stores.

Internationally, the group says the near-term trading environment remains tough, particularly in Thailand. Group sales overall, excluding fuel, grew 0.6 percent.