Tesco sales rise 1.3% over the Christmas period

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Tesco trolleysImage source, EPA

Tesco has hailed a "strong Christmas" after its UK sales rose 1.3% on a like-for-like basis in the six weeks ending 9 January.

Chief executive Dave Lewis said the better Christmas was due to lower prices and more staff in stores.

Shares in the UK's largest supermarket jumped more than 7% on the news.

But Tesco reported a 1.5% fall in sales for the 13 weeks ending 28 November after scrapping its "£5 off £40" promotion held in 2014.

Mr Lewis said in a statement: "Our Christmas performance was strong... There is plenty more to do, but we are making progress and are trading in line with profit expectations for the full year."

Tesco shares jumped 6.1% to 168p after the latest trading update.

The figures follow sales updates this week from Morrisons and Sainsbury's that were received positively by investors.

Price cuts

Tesco's total group sales, on a like-for-like basis, also rose over the six week Christmas period, increasing 2.1% on the same period last year.

However, group sales for the quarter were down 0.5%.

Mr Lewis said international sales were improving. "We continued our strong positive sales momentum in both Europe and Asia, with our Thai business reaching its highest ever market share."

Since taking over as Tesco chief in September 2014, Mr Lewis has put Tesco's focus on price cuts and putting more staff in stores in an attempt to revive the company's fortunes.

In April last year, Tesco reported the worst results in its history, with a record statutory pre-tax loss of £6.4bn for the year to the end of February.

However, Mr Lewis told the BBC in October that he was "quietly confident" about Tesco's turnaround.

The company said that its price cuts and 4,000 additional 'Here to Help' staff in stores had been key to the sales improvement over Christmas.

Image source, Reuters
Image caption,
On Tuesday Morrisons posted sales figures that surprised analysts and lifted some of the gloom over the struggling chain

It added that its prices over the period were about 5% cheaper than previously "on the lines that mattered".

Tesco said clothing sales over the period did particularly well, growing "significantly ahead of the market".

'Tick in the box'

Like other major supermarkets, the retail giant has been battling to halt a decline in sales in the face of stiff competition from German discounters Lidl and Aldi.

Tesco's share price hit an 18-year low last month as investors fretted over the pace of progress under Mr Lewis.

Analysts hope that stronger sales will translate into improved profitability, although there will be a worry that lower prices will eat into margins.

"This is a useful tick in the box for Tesco, generating good growth despite a more disciplined and less promotionally fuelled trading approach year on year. It offers some hope that the business might be able to deliver sustained volume growth," said analysts at Stifel in a note.

Earlier this week Morrisons reported better-than-expected sales over the Christmas shopping period compared with a year earlier.

And Sainsbury's, which is considering a bid for Argos-owner Home Retail Group, announced a 0.4% fall in like-for-like sales over the Christmas period. But the decline was less than many analysts had forecast.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "With its competitors already having provided some pleasant surprises, Tesco has completed the supermarket sweep with an update which has highlighted a particularly strong Christmas trading period.

"The picture for the third quarter overall may make less positive reading, although a return to growth for the first time in four years is an achievement, albeit at an anaemic rate."

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