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Festive growth for grocer

Tesco reports surprise uplift as Xmas sales grow

Tesco advertisingTesco has surprised analysts by reporting a positive Christmas trading performance with like-for-like UK sales up 1.3% for the six weeks to 9 January.

However, third quarter figures were down 1.5%.

Chief executive Dave Lewis said: “Our Christmas performance was strong, benefiting from lower prices on an outstanding range of products.  Our customer service improved materially and our colleagues went the extra mile.

“Put simply, we put customers at the heart of everything we did and they responded by buying more of what they needed at Tesco.

“International sales have also continued to strengthen, driven once again by improvements across the offer.  We continued our strong positive sales momentum in both Europe and Asia, with our Thai business reaching its highest ever market share.

“We are continuing to focus our efforts on serving our customers a little better every day and I want to thank my colleagues across the Group for their commitment, passion and energy.  There is plenty more to do, but we are making good progress and are trading in line with profit expectations for the full year.”

Group like-for-like sales grew by 0.4% for the 19 weeks to 9 January 2016 – the first reported increase for over four years. 

Edinburgh-based Tesco Bank continued to see strong growth in lending and an increasing number of customers opting for home insurance products.  

Despite this, there was a reduction in sales of (5.2)% over the Christmas period, which Tesco blamed on the introduction of European Commission caps on interchange income in December.  This followed the initial reduction driven by MasterCard’s agreement with the Competition and Markets Authority in April last year.

John Ibbotson, director of the retail consultancy Retail Vision, said: “Tesco’s Christmas numbers have shown there is light at the end of the tunnel but the weaker third quarter performance is a reminder of the hard work still ahead.

“The Dave Lewis turnaround plan appears to be working, with Tesco starting to push back against the fast-growing discounters Aldi and Lidl.

“The festive period aside, progress is achingly slow and there is nothing inevitable yet about the great Tesco turnaround.

“With all the major players dropping prices and the broader low food inflation environment, no grocer can expect a quick return to consistent sales growth.

“The challenge is to keep up the momentum and stay in the game. In this regard, Tesco will be thankful of its size, which means it can keep its prices down for longer than anyone else.

“What we shouldn’t lose sight of is the fact that a lot of the growth at Aldi and Lidl is coming from opening new stores. In this respect, the results of Tesco and indeed Morrisons this week should be seen in a more positive light.”

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