Tesco outperforms the market after a strong Christmas

Tesco reported strong sales over Christmas, bucking the trend among the big four and outperforming the grocery market, as Marks & Spencer continued to struggle.

Like-for-like sales at the UK’s largest supermarket rose 2.6% in the six weeks to 5 January, with Tesco UK up 2.2%, and Booker, the wholesaler acquired by Tesco last year, seeing sales up 6.7%.

This outperformed the market in UK in both volume and value terms.

Sales across its third quarter also rose, with like-for-like sales up 1.9%, reflecting “the transition to new own brands and subsequent resetting of mix in UK”, it said, with around 82% of customers buying into its ‘Exclusively at Tesco’ range.

In the core UK business, Tesco also reported an increase in third-quarter like-for-like sales of 0.7%, which it said represented its twelfth consecutive quarter of growth

Chief Executive Dave Lewis said the team had achieved “a lot” in the last 19 weeks and made significant further improvements to its customer offer in a more challenging market.

“In the UK we delivered significant improvements in our competitive offer and this is reflected in a very strong Christmas performance which was ahead of the market,” he said.

Online sales were also on the up, rising 2.6% over the Christmas period including Tesco’s biggest-ever week in online grocery and an increase in subscribers to its Delivery Saver, a delivery service plan designed to reduce the cost of home deliveries.

The supermarket also saw gains in its international business, with like-for-likes in Central Europe up 1.1% over Christmas, as it continues to “reshape” the business by shutting unprofitable stores in Poland. Asia’s like for like sales fell 2.4% over Christmas and 8.% in the quarter, but Lewis said the underlying performance was strong as its renegotiated with suppliers.

“We have more to do everywhere but remain bang on track to deliver our plans for the year and as we enter our centenary we are in a strong position,” Lewis said.

Marks & Spencer

Tesco’s positive results contrasted sharply with those of Marks & Spencer, which saw like-for-like sales down across its food sector by 2.1% and total food sales down 1.2%.

Chief Executive Steve Rowe said performance remained steady against the backdrop of well-publicised difficult market conditions.

“Our Food business traded successfully over Christmas as customers responded to improved value.  Our transformation programme remains on track.”

The retailer pointed out progress made in the journey to re-engineer the range and value proposition over the last six months.

“The underlying trend reflects the transition to ‘trusted value’ as we lower prices and remove complex and confusing multi-buy promotions. There are early signs of volume growth and we expect to see more momentum under a strong new management team as the year progresses,” it said.