Tesco has reported its biggest Christmas, winning market share from rivals to reach its highest level since January 2016.
Britain’s biggest supermarket group maintained its full-year profit outlook on Thursday as it reported a 4.1% rise in underlying UK sales for the key Christmas trading period.
Under chief executive Ken Murphy, the group is reaping the rewards of a programme to improve the value and quality of its products, step-up innovation and enhance its customer service.
Murphy said, “We delivered our biggest ever Christmas, with continued market share growth and switching gains.”
Industry data published on Tuesday showed that Tesco ended 2024 with a UK grocery market share of 28.5% – up 80 basis points on the year and its highest level since January 2016.
Strategy
Tesco – whose shares are up 23% over the last year – has benefitted from a strategy of matching the prices of discounter Aldi on some products and the popularity of its Clubcard loyalty scheme, which provides low prices for members.
These programmes are being financed by efficiency savings, with £500 million targeted for 2024/25.
The group is also continuing to benefit from the trend of consumers eating more at home than dining out, with sales of its ‘Finest’ premium range up 15.5% over the Christmas trading period.
Tesco said third quarter to 23 November UK like-for-like sales rose 3.8% – having been up 3.5% in the second quarter.
Growth accelerated to 4.1% in the six weeks to 4 January.
The group said it still expected retail adjusted operating profit, its preferred profit measure, of “around £2.9 billion” for its year to February 2025, up from the £2.76 billion made in 2023/24.
Tesco does, however, face a jump in costs in its 2024/25 financial year, as does the entire retail sector.
Increases social security payments imposed by the new Labour government’s first budget last October will impact costs, along with a hike in the national minimum wage and new packaging levies.
Murphy told reporters on Thursday that Tesco will face additional costs of about £250 million a year from the hike in social security payments, due to come into effect in April.
Share Price
Following the release of results, Tesco's share price fell by 1.6% in early morning trading, which Murphy attributed to the earlier publication of industry results.
He said, "It's a little bit of travel and arrive.
"I think a lot of people had already kind of priced in the performance given the Kantar (industry data) results that were published a few days ago.
"We don't read much into it."
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