Tesco and Debenhams reveal surge in sales

TESCO and Debenhams helped the high street maintain its festive sparkle yesterday as the retail heavyweights unveiled robust Christmas trading figures.

However, Game Group took the shine off proceedings as it admitted that the continuing slump in the computer games market had triggered a slide in its sales. A further reality check came from home furnishings group Dunelm, which warned growth would be hard to sustain in the year ahead.

The trading updates follow figures from the British Retail Consortium which suggested the sector had enjoyed its best growth in eight years last month as consumers braved the big freeze to go on a festive spending spree.

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Tesco, Britain's biggest retailer, hailed its strongest Christmas performance in three years as recession-weary customers bought festive treats and its bumper voucher handout paid off.

The supermarket giant said like-for-like sales in the six weeks to 9 January grew 4.9 per cent, excluding petrol and adjusted for the change in VAT.

Sales of its upmarket Finest range were described as a "real winner", growing by 16 per cent during the period, while 35 per cent more bottles of champagne were sold than a year earlier.

Tesco's performance was at the top end of City forecasts for the Christmas period and reflects a strong trading period across the industry.

Rival Sainsbury's last week reported a 4.2 per cent gain in like-for-like sales in the quarter to 2 January, excluding VAT and fuel.

Richard Hunter, head of UK equities at stockbroker Hargreaves Lansdown, said Tesco seemed to have rediscovered its "winning formula".

"The Tesco juggernaut is firmly back on track," he said. "The company has enjoyed formidable growth during the festive season and, with the exception of its fledgling US business, the numbers are strong across the board."

Department store operator Debenhams said it was pleased with trading over the festive period after profits improved for the second year in a row.

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The 0.1 per cent improvement in like-for-like sales for the 18 weeks to 2 January was in line with internal forecasts, the group added, although growth was limited by its decision to move away from concessions into own-bought merchandise.

Chief executive Rob Templeman said: "Our continued focus on cash margin means that for the second year in succession we have delivered an increase in profit before tax over the Christmas trading period."

Debenhams also plans to step up its store refit programme.

At Game Group, worse-than-expected sales figures mean that profits for the full year are set to come in below City forecasts at between 87 million and 93m – although this would still be the firm's second best annual figure.

Like-for-like sales in the UK and Ireland were down 17.5 per cent in the five weeks to 9 January. This represents a deterioration from the 16.8 per cent decrease in the 49 weeks to the same date.

The numbers will come as a disappointment to analysts who had pencilled in a stronger improvement in the company's sales decline, with some expecting high single-digit same-store falls.

Game said it expects the market to continue to move towards higher-margin software and new peripheral technology.

Dunelm's cautious outlook overshadowed news of a double-digit surge in interim sales at the 88-strong furnishings chain.