Major UK supermarket expects £3.1billion in profit after ‘intense’ Christmas

Tesco, the UK’s leading supermarket chain, has celebrated its largest market share in over a decade, as it notched up a rise in festive sales despite “intense” competition. The retail giant reported a 3.3% surge in like-for-like sales in the UK and Ireland during the six weeks leading up to January 3, with a 3.2% rise in the UK and a 3.8% boost in Ireland.

In the 13 weeks leading up to November 22, which includes the third quarter before Christmas, sales rose by 4%. According to Worldpanel data, Tesco increased its share of the UK grocery market to 28.7% in the three months leading up to December 28, which leapt to 29.4% during the crucial Christmas month. The company stated that this robust Christmas performance puts it on track for annual profits at the higher end of its recently revised guidance of between £2.9 billion and £3.1 billion.

However, the growth in festive sales represents a slight deceleration from the 3.7% reported across the UK and Ireland business for the same period the previous year. The company acknowledged that competition remains cut-throat as major players vie on price.

Sales in its Booker wholesale business also saw a decline of 2.1% during the six-week Christmas period, a downturn from a 0.9% drop in the third quarter.

Ken Murphy, chief executive, said: “Our investments in value, quality and service drove further gains in customer satisfaction and strong growth in fresh food, contributing to our highest UK market share in over a decade.

“Competition is as intense as ever, and we know value remains a priority for customers.”

The retailer recently announced it was reviving its iconic blue-and-white striped value branding as it intensifies its pricing battle with German rival Aldi.

Earlier this week, Tesco revealed the comeback of the blue-and-white stripes – axed back in 2012 – would “symbolise value at Tesco” and feature as the centrepiece of a major marketing blitz showcasing bargain prices on top branded goods.

The supermarket giant reported its busiest shopping days fell on December 22 and 23, whilst celebrating its most successful Christmas for digital sales with website transactions surging 11.2% and two purchases processed every second in the run-up to December 25.

Sales of its premium Finest collection soared 13% as Mr Murphy noted customers also prioritised quality during the festive period, with party product lines climbing 22%.

Tesco shares tumbled 5.5% during Thursday morning trading after sales growth fell short of City forecasts.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “Tesco continued to deliver for shoppers and investors alike this festive season, scooping up market share and increasing consumer satisfaction scores in an extremely competitive market.

“However, performance at its wholesale business, Booker, wasn’t as good as hoped due to the long-running decline in tobacco sales.

“The net effect was that Tesco only nudged its full-year underlying operating profit guidance to the top end of its current £2.9 to £3.1 billion range, while many had been hoping for a bigger upgrade.”

Russ Mould, investment director at AJ Bell, added: “Tesco may see full-year profit coming in at the top end of expectations, but its festive update did not pass the smell test with investors after a slowdown in underlying sales growth over Christmas.”

However, he noted: “These numbers are not a disaster as the company has its highest share of the British grocery market in more than 10 years. A more than doubling in the share price from the 2022 lows means the company will be judged more harshly for the slightest misstep.”

He added: “The recent strong Christmas trading by the discount names Aldi and Lidl shows competition is intense, even if Tesco is well placed among the established supermarkets to fight back.

“Offering discount prices through its Clubcard scheme enables it to drive customer loyalty while offering the kind of value the UK’s hard-pressed households are looking for.”