The Courier & Advertiser (Perth and Perthshire Edition)
Strong Tesco showing fails to excite investors
Firm’s stock hit as Christmas trading falls below City expectations
Shares in Tesco fell towards the bottom of the FTSE 100 yesterday despite the supermarket giant reporting a solid rise in sales over Christmas.
UK like-for-like sales rose by 1.9% in the six weeks to January 6, driven by a strong grocery performance.
The four weeks up to December 25 delivered record sales and volumes in the UK, helping deliver a 2.3% rise in third quarter comparable sales.
However, the uplift fell short of analysts’ expectations and shares fell by more than 4% in morning trading.
James Grzinic, analyst at Jefferies, said: “Tesco’s update confirmed a solid third quarter and Christmas, but not quite the dominant display expected by some.”
Nevertheless, Tesco chief executive Dave Lewis insisted the results underscored the group’s turnaround efforts.
“We have continued to outperform the market throughout this period,” Mr Lewis said.
“Our trading momentum accelerated across the third quarter and into December, with the four weeks leading up to Christmas Day delivering record sales and volumes in the UK.”
Tesco saw its biggest ever sales week in the UK over Christmas, with 58 million customer transactions and 770,000 online grocery deliveries in one week.
Festive food sales grew 3.4% on a likefor-like basis but general merchandise fell by 0.6% and tobacco sales were hit by the collapse of wholesaler Palmer & Harvey.
Supermarkets are battling against rising costs, increased competition and falling consumer confidence.
Tesco said it is working with suppliers to mitigate cost inflation, with Mr Lewis saying consumers remained “cautious” about how they spend their money.
Tesco is experiencing strong momentum relative to its peers and in October Mr Lewis hailed a “significant milestone” after unveiling the first dividend payout for three years.
The grocery chain was further buoyed in December when its £3.7 billion takeover of wholesale group Booker was given the final all-clear by the competition watchdog.
Shares closed down 9.6p at 202.3p.
We have continued to outperform the market throughout this period DAVE LEWIS TESCO CEO