Tesco sales inch higher over 'challenging' Christmas

Oscar Williams-GrutSenior City Correspondent, Yahoo Finance UK
Yahoo Finance UK
A woman walks past a Tesco extra superstore near Manchester, UK. Photo: Phil Noble/Reuters
A woman walks past a Tesco extra superstore near Manchester, UK. Photo: Phil Noble/Reuters

Tesco’s (TSCO.L) managed to grind out a small growth in UK sales over Christmas, the supermarket said on Thursday, adding to the picture of a tough time for grocers over the festive period.

Tesco said sales over the Christmas period fell 0.8%, dragged down by poor performance in central Europe. In the UK and Republic of Ireland, total sales rose by 0.4%.

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“In a subdued UK market we performed well, delivering our fifth consecutive Christmas of growth,” chief executive Dave Lewis said.

Tesco said the UK “has clearly been challenging” but said it had its biggest ever sales day over Christmas.

The results underline a difficult Christmas for supermarkets, as the general election dampened consumer spending. Sainsbury’s (SBRY.L) said on Wednesday that its sales fell over the Christmas period and Morrisons’s (MRW.Lsales dropped by 1.7% over the crucial festive period. Market research firm Nielsen said this week grocers suffered their worst Christmas since 2014.

READ MORE: 'Unusually challenging' Christmas for supermarkets

“The peak Christmas trading period in the UK has been a bit of a slog for the major grocers,” wrote Clive Black and Darren Shirley, retail analysts at Shore Capital. The pair said Tesco had “toughed out in a weak UK” market.

Sales at Tesco’s central Europe stores crashed by 9.1% over Christmas but the retailer said this was largely down to “ongoing significant transformation of our business” in Poland and Czech Republic.

Tesco also updated investors on third quarter trading, saying sales fell by 0.9% across the group. Sales grew by 0.4% in the core UK and Republic of Ireland markets.

Bruno Monteyne, a supermarket analyst at Bernstein, wrote in a note: “Encouragingly, the Christmas trading performance was ahead of third quarter, showing trend improvement, and over Xmas they outperformed peers on a volume and value basis.”

Shares in Tesco rose 1.8% in early trade on the London Stock Exchange.

READ MORE: Sainsbury's sales fall over Christmas after Argos slump

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