Tesco has followed its rivals in reporting exceptional Christmas trading figures on the back of booming online sales and customers treating themselves at home with premium food & drink.
UK like-for-like sales grew 6.7% over its third quarter to 28 November, with the figure accelerating to 8.1% in the six week Christmas period to 9 January. For the full 19 week period, growth was 7.2%.
“Our focus on looking after our customers, including delivering record availability, robust safety measures and great value, has enabled us to maintain strong momentum through the Christmas period, outperforming the market every week,” said Chief Executive Ken Murphy, who succeeded Dave Lewis at the end of last year. “We delivered a record Christmas across all of our formats and channels.”
As seen by other supermarket chains, Tesco’s online sales continued to surge with growth of over 80%. This equates to nearly £1bn in extra sales over the 19 week period.
The group’s strong performance over Christmas was driven by food, buoyed by demand for premium lines. Sales of Tesco’s Finest range climbed 14%, whilst promotions on vegetables and wine proved popular. Sales of plant-based products also increased strongly, with growth of 90% in Tesco’s Plant Chef range.
Tesco also hailed the success of its Aldi Price Match initiative and Clubcard Prices promotion which has increased penetration of its loyalty card by more than 10% pts to over 80% of sales in its larger stores.
General merchandise sales were more subdued but still grew by 4%, driven by toys, home and electrical items.
The group’s Booker unit saw total sales over the 19-week period grow 12.4%, boosted by a 14% contribution from the Best Food Logistics business it acquired last year. However, Booker’s like-for-like sales fell 8.3% over the Christmas period as the robust performance of its retail supply activities was not enough to offset the disruption in the hospitality sector caused by tightening Covid-19 restrictions. Booker’s catering sales plummeted 49% on a like-for-like basis over the Christmas period, compared to a decline of around 30% during the third quarter.
In the Republic of Ireland, like-for-like sales grew 11.8% during the third quarter and by 12.7% over Christmas. Meanwhile, its operations in Central Europe continued to struggle with growth of just 0.9% in the third quarter. This worsened to a 4.2% fall over the Christmas period, which Tesco blamed on the tightening of Covid-19 restrictions that included limits on opening hours.
Back in the UK, Tesco highlighted that costs related to the pandemic had increased further due to the worsening of the crisis. It is now expecting costs in its domestic market to be £810m – an increase of £85m since its previous estimate in October. However, these costs are being offset by the benefits of group’s elevated sales and Tesco stated that annual retail operating profit remained on track to be at least at the same level as last year. This excludes the repayment of £535m business rates relief promised by the chain in December.
Meanwhile, the retailer used the results to reassure customers that it was navigating Brexit-related changes to its distribution network with it maintaining “strong levels of availability” in supplies.
However, it admitted that there have been some issues for customers in Northern Ireland and Ireland in the provision of ready meals, fruit and some processed meat. Earlier this week, Tesco joined rivals in warning of “unworkable” Brexit rules covering the shipment of goods to Northern Ireland.
Murphy commented: “Ready meals have been the most affected as they have an eight-day shelf life so any wait is more likely to have an impact. Some processed meat and some citrus fruit has also been impacted, but it is important to stress that our availability in the Republic and Northern Ireland is strong and is very strong in the mainland UK.”
He added: “We see this as a challenge at the moment, but not a crisis.”
NAM Implications:
- As UK No.1, Tesco is well poised to optimise Lockdown…
- …and patently/deservedly reaping the rewards of raised demand..
- …lower promo costs…
- …picking up H&B sales at Boots expense…
- …sufficiently wide range to provide ‘easy’ substitute for Brexit-induced shortages.
- (whilst keeping Aldi at bay…)
- Key for NAMs to check their Tesco sales vs category, speciality (plant-based), geography.
