Tesco says UK sales improving

LONDON Oct 3 (Reuters) - Tesco, Britain's biggest retailer, on Wednesday posted a small rise in quarterly underlying sales in its home market after 18 months of decline, indicating changes introduced after a shock January profit warning are starting to make an impact.

The world's third-largest stores group, which makes over 60 percent of its trading profit in Britain, said sales at UK stores open over a year, excluding fuel and VAT sales tax, were up 0.1 percent in the 13 weeks to Aug. 25, its fiscal second quarter.

That compares with analysts average forecast of flat sales and represents a significant improvement on a first-quarter decline of 1.5 percent.

In April Tesco unveiled a plan to invest 1 billion pounds ($1.61 billion) to stem a steady decline in market share to Wal-Mart Stores' Asda, J Sainsbury and Morrisons, as well as discounters Aldi and Lidl.

That investment was largely responsible for Tesco's first fall in profits in nearly 20 years.

First half group trading profit fell 10.5 percent to 1.6 billion pounds ($2.58 billion), while UK trading profit fell 12.4 percent to 1.1 billion pounds - both in line with analysts' expectations.

"We continue to act decisively to tackle challenges and seize opportunities across the group," said Chief Executive Philip Clarke.