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Demand for fresh food drives Tesco's Christmas sales boost


Tesco is believed to have kept its recent sales recovery on track over the crucial festive season

Tesco is believed to have kept its recent sales recovery on track over the crucial festive season

Tesco is believed to have kept its recent sales recovery on track over the crucial festive season

Tesco has emerged as a festive winner after reporting a rise in sales over the crucial Christmas trading period.

The supermarket giant said UK like-for-like sales in the six weeks to January 7 rose by 0.7%, helped by strong consumer demand for fresh food.

Tesco also notched up a 1.8% rise in third quarter sales, marking a year of continuous growth as its recovery under boss Dave Lewis continues.

He said in a trading statement: "We are very encouraged by the sustained strong progress that we are making across the group. In the UK, we saw our eighth consecutive quarter of volume growth and delivered a third successful Christmas.

"Our fresh food ranges proved particularly popular, outperforming the market with great quality, innovative new products and even more affordable prices."

Mr Lewis, who has been leading an overhaul since he took over from Philip Clarke in 2014, aims to slash costs by £1.5 billion over the next three years to help boost margins and return the group to bottom-line profit growth.

Tesco said it is o n track to deliver at least £1.2 billion in group operating profit for the full year.

However, shares in the retailer were down over 2% in morning trading after non-food sales were hit following the withdrawal of its Clubcard Boost promotion.

Richard Hunter, head of research at Wilson King Investment Management, said: "The turnaround continues at Tesco, with the shares having risen 44% over the last year, as compared to a 23% hike in the wider FTSE 100, albeit from a low base.

"This has yet to filter through to the market consensus of the shares, which remains rooted to a sell. Nonetheless, a continuation of the current improvement would inevitably put upward pressure on prospects and indeed the view in general."

Tesco said it saw particularly good growth across its core Christmas grocery and fresh ranges, including a 24% increase in party food and an 18% rise in Free From sales.

The chief executive said the firm, which was embroiled in a furore over an inflation-linked rise in the price of Marmite last year, is working "shoulder to shoulder" with suppliers to help mitigate the impact of the collapse in the value of the pound.

He said: "Inflation pressure is there, but we will keep doing everything we can to minimise the impact."

Mr Lewis added that Tesco has "seen no change in the pattern" of consumer spending behaviour.

The firm said: "We have worked hard throughout the period - in collaboration with our supplier partners - to minimise the impact on our customers of the inflationary pressures that have started to emerge in the market.

"As a result, while deflation has eased, the price of a typical basket remains nearly 7% cheaper than in September 2014. We will continue to do all that we can to ensure that we offer our customers the best possible prices."

Across the group, Tesco saw like-for-like sales grow 1.5% in the third quarter and 0.3% over Christmas.

As a result of the positive figures, Tesco's market share has grown for the first time since 2011.

The figures cap a week of positive data for supermarkets, with Sainsbury's and Morrisons having also posted stellar results.

Marks & Spencer also revealed a return to sales growth at its embattled clothing arm for the first time in nearly two years thanks to an overhaul of its ranges and the timing of Christmas.