Tesco sales top analyst predictions

By Anita Awbi

- Last updated on GMT

Related tags Tesco

Once again Tesco has outperformed its rivals, enjoying strong
Christmas sales on core food items and substantial growth in
non-food sales despite rising energy costs.

It may come as no surprise to hear that the world's third largest retailer has topped analysts forecasts to deliver the best festive performance of all Britain's leading supermarkets.

But with energy and raw material costs rising and widespread consumer price deflation, is there no stopping Tesco?

Apparently not. The retailer posted an impressive like-for-like sales growth of 5.7 per cent, excluding petrol, in the seven weeks to January 7 - slightly above analysts' expectations and beating close rival Sainsburys by 0.5 per cent.

Tesco.com also enjoyed a bumper season, delivering over a million orders in the four-week period before Christmas.

And growth of core food sales, especially the Tesco Finest range, was greater over the festive period than in the third-quarter, thanks to the company's continued hard-line price investment strategy.

Total UK sales rose 10.1 per cent, including petrol, representing strong individual store performance.

Goldman Sachs said: "The message here is that, if anything, the core food business is actually trading somewhat stronger than in the previous quarter, suggesting to us that the pick-up in price aggression in the sector has been water off a duck's back from Tesco's point of view."

Tesco's third quarter policy of deflating prices by 1.5 per cent was still broadly operational during the festive period, and looks set to remain well into the new year as price remains a key battleground for the major retailers.

And although the cost of energy and raw materials has increased, with CEO Terry Leahy expecting annual total costs to top £60 million, full-year profits look unlikely to be seriously affected.

"As you know there are very very tough cost pressures for us this year in terms of energy and rates and this good trading will help cover those costs rather than add to the bottom line, I think,"​ finance director Andrew Higginson told Reuters.

Meanwhile, international sales continued to soar, following a trend that most international retailers are enjoying as they continue to invest in Eastern Europe and Asia.

Tesco's total international sales were up 16.1 per cent, with Asian sales growth outstripping Central European growth as the company is drawn into aggressive price-cutting policy in the Czech Republic and Hungary.

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