Tesco today underscored its dominance of the supermarket sector as Britain’s biggest retailer reported “strong growth” in sales over the Christmas period and shrugged off early-stage competition from some of its recovering rivals.
As it capped a busy post-Christmas reporting season for Britain’s supermarkets, Tesco delivered record sales growth of an underlying 5.7 per cent over Christmas, excluding petrol sales, and boasted of another record year for its online shopping service, Tesco.com.
The retailer, whose chief executive is Sir Terry Leahy, increased its sales during the fourth quarter at a slightly faster rate than in the previous three-month period, when same store sales grew by 5.5 per cent.
“Seasonal foods, especially Tesco Finest products, sold very well and growth in non-foods was also pleasing, with home entertainment, electronics, clothing, toys and gifts performing strongly,” the company said as it updated its investors on trading during the seven weeks to January 7.
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Tesco is now firmly on course to make pre-tax profits of roughly £2.2 billion for its full financial year.
In a note circulated ahead of today’s update, brokers at Seymour Pierce described Tesco as “one of the few stocks that offers reasonable value at present”, compared with rivals such as J Sainsbury and Wm Morrison.
The broker also pointed to Tesco’s ability to expand overseas, where over the Christmas and New Year trading period top-line sales grew by 16.1 per cent.
“Tesco is not only the ‘dominant player’ in the UK grocery market, but has considerable potential to increase its profits from its Eastern Europe and Far East operations,” Seymour Pierce said yesterday.
Domestically, Tesco said today that it breached two further sales landmarks over the festive period, with more than 1 million customers placing orders through its website over the four weeks before Christmas and Tesco Mobile signing up its millionth customer during the month.
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Having warned in its third-quarter results of the potential impact of the high oil price on costs, Tesco added that the “moderating” price of petrol meant that overall in the UK its prices were reducing at a rate of 0.5 per cent. Prices in its stores are falling at a rate of 1.5 per cent.
Today’s results are yet another clear vindication of Sir Terry’s price-driven strategy and come despite signs of a recovery among some of Tesco’s arch-rivals such as Marks & Spencer and Sainsbury’s, both of which reported healthy sales growth over the seasonal period.
Shares in Tesco closed last night at 318p, valuing the retailer at just short of £25 billion.
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