- Prices reduced
- Online sales growth
Tesco (TSCO) raised its profit guidance for the second time since October on the back of robust festive trading, with UK like-for-like (LFL) sales at the nation’s largest supermarket rising 9.2 per cent in the four weeks to Christmas as premium product sales surged and prices were cut. Management now expects a retail adjusted operating profit of around £2.75bn for the full year, up from its previous forecast of £2.6bn-£2.7bn.
Over the 19-week period to 6 January, covering the company’s third quarter and the festive period, LFL retail sales rose 6.4 per cent. The UK and Republic of Ireland markets led the way, each posting growth of over 7 per cent. Sales at wholesale business Booker climbed by 4 per cent but fell in central Europe by 0.3 per cent.
The performance was helped by 16.7 per cent UK sales growth for the company’s Finest range, which enjoyed a record Christmas sales week. Elsewhere, domestic online sales rose 11.5 per cent.
As with rival J Sainsbury (SBRY), which disappointed investors on the day before this update with a contraction in non-food sales, Tesco is trying to battle back against the rise of the German discounters Aldi and Lidl. It cut prices on 2,700 products over the festive period.
Progress was seen in what the company referred to as “consistent volume growth”, in a context of easing food price inflation, and in market share switching gains. Researcher Kantar said that Tesco grew its grocery market share by 0.1 percentage points in the 12 weeks to 24 December to hold 27.6 per cent of the market.
As well as the operating profit bump, management now forecasts retail free cash flow generation of around £2bn for the year, at the upper end of prior guidance. Tesco is the grocery winner from the abundance of market updates this week.
Last IC view: Buy, 266p, 04 Oct 2023
