Tesco shares plunged 55p in early trading after the retailer recorded underwhelming sales for the Christmas period and predicted a difficult year ahead.

The supermarket giant's shares stood at 330p at 11am, a fall of over 14 per cent.

Like-for-like food sales in the UK declined 1.3 per cent for the six weeks to 7 January 2012, with sales excluding VAT and petrol down by 2.3 per cent.

The group's international performance was robust, however, with growth of 8.2 per cent for the period.

Although underlying profit before tax and earnings per share were 'broadly in line' with market consensus, Tesco predicted trading profit growth to be at the 'low end of the current consensus range'.

Steve Ibbotson, managing director of Retail Vision, said Tesco had underperformed its peers and pointed the finger at its Big Price Drop campaign.

'By offering an eye-watering £500 million in discounts, the campaign certainly was an expensive gamble,' he said.

'The most charitable assessments of these numbers will be that it has flunked the test. Tesco has underperformed its peers, especially Asda and Sainsbury's, with both food and non-food sales down on a like-for-like basis,' he added.

Ibbotson offered the group a glimmer of hope though, suggesting online sales - up 14 per cent on a like-for-like basis - could be key to any resurgence.

'Expect Tesco to build on this in the years ahead,' he said.

Tesco chief executive Phillip Clarke defended the price drop campaign.

 'The Big Price Drop is an important first element in this process but there is much more we can do to further improve our shopping trip for customers and we are determined to move faster,' he commented.

Chris Beauchamp, market analyst at IG Index, quipped, 'Looks like they'll need every little bit of help they can get.'