Britain’s biggest supermarket chain, Tesco PLC (TSCO.L) delivered stronger sales figures than were expected in its first quarter, suggesting that it might be on the road to recovery.

The company reported this morning that same store sales had dropped 1.3% for the first quarter compared to last year, nearly half the 2.3% drop predicted by analysts at Barclays.

Shares in Tesco, down 21 percent over the last year, were up 3.4 percent this morning, their highest price in more than a month.

Tesco has followed the trend of most British supermarkets and had a slow 18 months, with slumping sales and declining profits. In April, Tesco reported the steepest ever full-year loss for a British retailer, arguably the worst year in its 96 year history.

“Our first quarter results represent another step in the right direction,” Tesco’s new Chief Executive Dave Lewis told reporters. “Clearly customers are noticing that we’re investing in the offer.”

Looking forward, Mr. Lewis said he expects to see deflation for the foreseeable future and warned that there is “still an awful lot of volatility out there as we change quite a lot in our business”

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