Tesco declared festive winner after strong in-store and online sales trigger profit upgrade

Tesco has become the latest major retailer to upgrade its annual outlook after solid Christmas trading put it on track for better-than-expected retail earnings.

Britain’s biggest retailer reported a 0.3 per cent rise in like-for-like sales over the six weeks to January 8, compared with a year earlier, when trade was boosted by coronavirus lockdown restrictions. On a two-year basis, it saw UK festive sales jump 8.8 per cent.

Third-quarter figures showed UK like-for-like sales lifting 0.2 per cent while the wider group saw growth of 2.4 per cent in the three months and a 3.2 per cent increase over the six-week festive period to January 8.

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The group said the better-than-expected trading has put it on track to deliver full-year retail operating profits slightly above its previous guidance of between £2.5 billion and £2.6bn - marking its second upgrade in four months.

Tesco remains Britain's biggest retailer with the greatest market share of any grocery chain. Picture: Andrew Milligan/PA Wire

Tesco’s update comes after a slew of retail upgrades earlier this week. Rival supermarket major Sainsbury’s said it was on track to beat profit targets on the back of better-than-expected festive food and drink sales.

The UK’s second-largest grocer, behind Tesco, said its overall sales dropped in the latest quarter but highlighted that sales of grocery products grew over the key period around Christmas.

Tesco cheered its strongest market share in the UK for four years.

Chief executive Ken Murphy told investors: “Despite growing cost pressures and supply chain challenges in the industry, we continued to invest to protect availability, doubled down on our commitment to deliver great value and offered our strongest ever festive range.

“This put us in a strong position to meet customers’ needs as, once again, Covid-19 led to a greater focus on celebrating at home.

“As a result, we outperformed the market, growing market share and strengthening our value position.”

Richard Hunter, head of markets at investment platform Interactive Investor, said: “Tesco has again cemented its reputation as the UK’s flagship supermarket, boosted by a dominant Christmas performance.

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“In terms of market share, Tesco was the winner over the festive period, and the accelerating trend towards online shopping vindicated its previous decision to ramp up capacity.

“Fulfilling around 1.2 million orders per week online, the figure represents growth of almost 60 per cent compared to pre-pandemic levels. It is also a clear indication that the array of alternatives which Tesco is offering, in combination with both its large and convenience stores, is one which the competition is finding hard to emulate.”

John Moore, senior investment manager at Brewin Dolphin, the wealth management firm, noted: “Tesco has followed Sainsbury’s with a strong set of Christmas results against tough comparators from last year.

“All cylinders are firing at the company: the core supermarket is growing its market share, online sales are significantly ahead of where they were pre-pandemic, its wholesale arm Booker is posting good quarterly growth helping to maintain overall performance, and the bank is benefitting from action taken and a favourable backdrop.

“The share price has responded positively since last year’s special dividend,” he added.

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