Tesco records best sales performance in two years-Kantar Worldpanel

(Adds details, background, share price reaction)

LONDON, Sept 20 (Reuters) - Tesco (Xetra: 852647 - news) , Britain's

biggest supermarket chain, has achieved its best 12-week sales

performance for over two years, industry data showed on Tuesday,

adding to evidence that the firm's recovery from several years

of trouble is now well established.

Market researcher Kantar Worldpanel said Tesco's total sales

fell 0.2 percent year-on-year in the 12 weeks to Sept. 11 - its

best reading since March 2014, .

Tesco, which has also reported two straight quarters of

underlying UK sales growth, will publish first-half results and

second-quarter sales on Oct (Shenzhen: 000069.SZ - news) . 5.

Hammered by changing shopping habits, the rise of German

discounters Aldi and Lidl and an

accounting scandal in 2014, Tesco has fought back under Chief (Taiwan OTC: 3345.TWO - news)

Executive Dave Lewis, who took charge in Sept. 2014, with a

strategy based on lower prices, streamlined product ranges,

better customer service and simplified relationships with

suppliers.

Its shares, which have increased 20 percent so far this

year, were up 1.1 percent at 178.4 pence at 1122 GMT.

Kantar said Tesco was the best performer of Britain's big

four supermarkets over the 12-week period, followed by

Sainsbury (Amsterdam: SJ6.AS - news) 's with a 1.4 percent fall in sales and persistent

laggard Asda with a 5.4 percent decline.

Morrisons' total sales fell 2.3 percent - a reading which

reflects the 5 percent reduction in its selling space over the

last year.

The growth of Aldi and Lidl continued, with the pair

recording sales rises of 11.6 percent and 9.5 percent

respectively, and still gaining market share.

"Not only are both continuing to expand their store estates

but existing customers are visiting more frequently and upping

their basket size," said Fraser McKevitt, head of retail and

consumer insight at Kantar Worldpanel.

Overall UK grocery sales rose 0.3 percent, boosted by a 8.5

percent rise in alcohol sales in the last four weeks of the

period.

Kantar said price deflation was 1.1 percent for the 12

weeks. Falling prices reflect the impact of Aldi and Lidl and

the market's competitive response, as well as deflation in major

categories such as detergents, bacon and crisps.

Market share and sales (percent)

12 wks to 12 wks to pct change

Sept. 11, Sept. 13, in sales

2016 2015

Tesco 28.1 28.2 -0.2

Sainsbury's 15.9 16.2 -1.4

Asda 15.7 16.7 -5.4

Morrison 10.4 10.7 -2.3

Co-operative 6.6 6.4 3.1

Aldi 6.2 5.6 11.6

Waitrose 5.3 5.2 3.4

Lidl 4.6 4.2 9.5

Iceland 2.1 2.0 6.3

Source: Kantar Worldpanel

(Reporting James Davey and Sarah Young; editing by Kate Holton,

Greg Mahlich)