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… while Tesco outperforms the market over crucial Christmas period

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Tesco has bucked the Christmas trend with the grocer delivering a fifth consecutive Christmas period of growth, which is impressive considering it was the best performer in 2018.

Like for like sales grew by 0.4% in the UK, with a strong performance in its fresh food segment and a positive response to the expanded plant-based food range sees group outperform the market.

Acquisition of wholesaler Booker in 2018 has also proven to be a great diversifier to Tesco’s offering, generating strong growth in a difficult environment.

Meanwhile, robust initiatives such as the Clubcard and seasonal offerings continuing to drive both consumer loyalty and demand in their key UK market.

David Lewis, Tesco CEO, says: “Whilst the UK environment has clearly been challenging, the combination of our attractive customer offer and strong operational delivery enabled us to outperform the market once again, following on from our strong performance last year. Customers benefited from lower prices – with a typical basket of 21 festive products in the weeks before Christmas being £2.28 cheaper year-on-year – and strong, relevant promotions, including our first ever Christmas Clubcard Prices offer.”

Lewis continues: “Over the Christmas period we outperformed the market in both volume and value terms, with a strong performance in fresh food. Further improvements in price and quality were complemented by our ‘Festive 5’ vegetable offer and an enthusiastic customer response to our significantly expanded range of plant-based foods. Customer satisfaction with our shopping trip further improved and we saw our highest level of availability in six years. Our online grocery business delivered over 14 million orders across the 19 weeks, with an increase in both average basket size and customer satisfaction scores for the Christmas period. Our headline sales performance for the UK as a whole included a c.(0.4)% impact from reduced general merchandise sales as we continue to refine the mix of our offer.”

Joe Healey, Investment Research Analyst at The Share Centre, comments: “Considering the difficulty supermarkets are currently facing, as indicated by M&S’ figures this morning, these results go to show Tesco is still one of the leading figures in the industry. The Booker acquisition is generating strong growth in a difficult environment and an area the group is actively looking to improve moving forward, which should be promising news for investors.”

Healey concludes: “Overall these results indicate a strong finish to a difficult year and will set up investors nicely heading into 2020. No news regarding the business’s potential disposal of Thai and Malaysia operations will roll-over anticipation to the next update. Despite a defensive element to the shares, we currently view the stock as a ‘Hold’ considering the competitive market dynamic, particularly the discount retailers who continue to be a prominent threat.”

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