(Bloomberg) -- Tesco Plc said sales in the UK are falling in an “incredibly challenging” market as consumers are squeezed by the higher cost of living.

Britain’s biggest supermarket chain reported a greater than expected 1.5% decline in like-for-like UK sales in the first quarter, according to a statement Friday, even while total group sales rose 2%.

Tesco is “seeing some early indications of changing customer behavior as a result of the the inflationary environment,” said Chief Executive Officer Ken Murphy in fresh evidence of how shoppers are battling to cope with the highest inflation in 40 years. 

The retailer, which also owns wholesaler Booker, warned in April that profit will be squeezed this year as the company tries to keep prices low for consumers and supply-chain disruptions weigh heavy. It’s a shift of sentiment from the pandemic when Tesco benefited from more people eating at home and shopping online, leading the grocer to raise its profit forecasts twice in the last financial year.

Tesco stuck to its full-year forecast of retail adjusted operating profit between 2.4 billion pounds ($3 billion) and 2.6 billion pounds, meaning earnings will show little change at best.

The company’s shares have fallen 14% so far this year.

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