Tesco has published its “biggest ever” Christmas results, with fresh food and online sales pushing the business ahead of the market.
Like-for-like sales in the UK grew by 2.3% in the third quarter, representing the eighth consecutive quarter of growth.
Tesco also saw record sales during the Christmas period, delivering its strongest ever week of sales in the week leading up to Christmas itself and “significantly” outperforming the market. Fresh food outperformed the rest of the grocers by nearly 4% – some 600,000 turkeys were sold and lamb and fresh salmon sales grew by 15% and 23% respectively.
Online orders proved particularly popular – over four million customer orders were made over the Christmas period, contributing to a sales growth of 5%. Its own brand ranges also performed strongly, with sales in its core Tesco range and Tesco Finest all growing by more than 4% in the period.
While clothing sales grew roughly 5% over Christmas, general merchandise (GM) sales as a whole declined by -0.6%. Tesco’s strong performance was also impacted by the demise of wholesaler Palmer & Harvey, which resulted in lost tobacco sales across its supermarkets. Tesco was its largest customer.
We will try to offset inflation so that customers don’t feel it. Cost increases are lower than this time last year. [We will look at] what we can do to offset pressure for customers.
Dave Lewis, Tesco
Chief executive Dave Lewis said the business had been holding back inflation by passing less of the cost on to customers, which set the business up well for the third quarter. There was also “more food than ever before” in-store, making it more competitive. It is now looking to address falling sales within its GM business.
“The momentum in food is there and it’s sustainable and long term. But in terms of non-food we’ve been very active in changing the offering we bring to Tesco, and we’re very happy with the changes we’re making as we introduce new brands in homeware, which are working. And working well,” he said during a press briefing this morning (11 January).
Looking ahead, he recognises that inflation might still pose a problem to the business but believes it will ease off later in the year.
“We will try to offset inflation so that customers don’t feel it. Cost increases are lower than this time last year. Pressure might be lower in the system going forward, so [we will look at] what we can do to offset pressure for customers,” he said.
More Christmas results reported
Tesco wasn’t the only grocer to publish its Christmas results today. Waitrose achieved 1.5% like-for-like sales growth for the six weeks ending 30 December 2017, with its online business achieving the biggest week of sales in its history.
Sainsbury’s results, which came out yesterday (10 January), showed a 2.3% rise in grocery sales over the 15 weeks to January – but were held back by weaker general merchandise sales at Argos.
And while most grocers have enjoyed strong results, the same can’t be said for Marks & Spencer. Total food sales were up 3.6% in the 13 weeks to 30 December, but like-for-like sales were down -0.4% compared to last year.
Chief executive Steve Rowe admitted the business “has been a little niche” at times, which is why it needs to be more competitive when it comes to more basic Christmas items, like Brussels sprouts.
“Where we show we are special and different and have innovated strongly our performance is very good, but there is more to do on commodity items, like Brussels sprouts where there is a battle on price. We have got to be sharper there,” he said on a call this morning.
Today’s results are in line with Kantar Worldpanel data, which came out earlier this week. The figures show that Tesco was the fastest growing of the big four supermarkets, with sales up 3.1% during the past 12 weeks.
However, Aldi and Lidl are level pegging in the battle to be the nation’s fastest growing supermarket, both growing sales by 16.8% year on year. The discount retailers collectively managed to attract nearly one million additional households over the past three months.
Overall, it seems the average British household shrugged off economic worries to spend a record £1,054 on groceries over the past three months including the Christmas period. Despite tightening household budgets, shoppers continued to trade up to more expensive options. A record £469m was spent on premium own label lines in December.