Tesco sticks with profit outlook after stronger than expected Christmas sales

Supermarket Tesco kept its full-year profit guidance after it joined rivals in reporting stronger than expected Christmas sales despite an escalating cost-of-living crisis.

The supermarket group, which has a 27.5 per cent share of Britain’s grocery market, said today (12) that like-for-like sales rose 4.3 per cent in its third quarter to Nov 26 and were up 7.2 per cent in the six weeks to Jan 7. It said it had “good momentum” going into 2023.

British supermarkets have reported stronger-than-expected festive trading as families hosted larger Christmas gatherings after two years of pandemic restrictions and treated themselves at home rather than going out to save cash.

Commenting on figures by Tesco, Joe Dawson, Retail Analyst at GlobalData, stated that while these numbers pale in comparison to discounters Aldi and Lidl’s huge sales growth over the festive period, Tesco’s seems to have performed to market expectations.

“Other traditional supermarkets reported similar results, with Sainsbury’s like-for-like sales growth up 5.9 per cent, while M&S’ food division increased sales by 6.3 per cent in Q3. Taking these results into account, the market share gains that Aldi and Lidl are making look likely to be coming from either ASDA, Morrisons or both, who are yet to release trading updates for the festive period.

The key driver has been a focus on value and quality as consumers’ disposable incomes were squeezed by rising inflation. Tesco’s combination of its Aldi Price Match and Low Everyday Prices ranges, as well as its Clubcard loyalty scheme, highlighted the retailer’s competitive pricing and allowed it to protect its market share.

“On a broader scale, Tesco’s catering arm Booker increased its sales by 10.0 per cent over 19 weeks, outperforming a declining market, while its Central Europe operation saw particularly strong growth, with food up 12.9 per cent and Clubcard sales penetration rising to 84 per cent.

“The grocer increased online sales by 2.0 per cent over the 6 week period, after opening of urban fulfilment centres this year and the expansion of its Whoosh rapid delivery service which offered discounts on party food and drinks during the World Cup,” Dawson said.