Tesco, the supermarket group, yesterday dampened speculation that it was planning to float off its internet retailing arm TescoDirect from the rest of its operation.

Its shares had been buoyed on Monday by growing expectations that it would announce at its results meeting next Tuesday an intention to create a new stock market listing.

But chief executive Terry Leahy yesterday said e-commerce was at the heart of retailing and could not be separated from Tesco's core business. He told the annual meeting of the British Chambers of Commerce: "Every company has a long queue of banks outside their door suggesting they should go out and float their businesses. You have to decide whether your businesses on the internet are an interesting sidelines or whether they are the future of your company."

But he did not comment on predictions that he would split off TescoDirect and build up a separate management team to help it expand.

Tesco has stolen a march on competitors by building up its online grocery operation by using its existing stores to source deliveries. Others have been building depots especially to service Net orders.

But Tesco management is frustrated about the low stock market valuation of the company which makes it difficult to expand as fast as it would like.

Tesco shares closed up 4p at 219.5p.