Group sales excluding VAT and petrol sank 2.9 percent in the third quarter of its financial year or 13 weeks to 28 November from a year earlier, Tesco said in an update.
On a like-for-like basis, which strips out the impact of new floor space, sales dipped by 0.5 percent.
In the crucial Christmas trading period, or six weeks to January 9, sales slid by 0.9 percent -- and jumped 2.1 percent higher on a like-for-like basis.
"Our Christmas performance was strong, benefiting from lower prices on an outstanding range of products," said chief executive Dave Lewis in the statement.
He added: "There is plenty more to do, but we are making good progress and are trading in line with profit expectations for the full year."
In home market Britain, like-for-like sales retreated 1.5 percent in the third quarter, as it suffered from intense supermarket price wars and competition from German-owned discounters Aldi and Lidl.
On a more positive note, they grew 1.3 percent over the festive period or six weeks to January 9, aided by extra staff and price cuts. That beat market expectations for a decline.
Tesco said the third quarter of its previous financial year had been buoyed by nation-wide coupon campaigns that were not repeated this time around.
In October, the supermarket chain revealed it had fallen into a net loss during its first half.
The group had already plunged into a record loss in 2014/2015 after an accounting scandal, a fierce supermarket price war and vast property write-downs.
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