Tesco ups profit targets as sales surge over Christmas

(Sharecast News) - Supermarket giant Tesco delivered an impressive set of third-quarter results with sales growth picking up sharply during the key Christmas trading period, as it upped its profit guidance for the full year.

The retailer now expects adjusted operating profit forecast to total £2.75bn for the 12 months to 28 February 2024, ahead of previous guidance of £2.6-2.7bn.

The country's biggest grocer said like-for-like sales increased by 6.6% across the group in the three months to 25 November, with UK LFL sales up 7.9%, ahead of the Citi estimate of 7.5% growth.

In the six weeks to 6 January, UK LFL sales were 6.8% higher than last year, which includes growth of 9.2% in the four weeks to Christmas.

In the Republic of Ireland, LFL sales grew 8.3% during the third quarter, while the wholesale division Booker saw 3.9% growth on last year.

Central European operations continue to be a weak point for the company, where LFL sales were down 1.4% year-on-year, though the company said price cuts and incentivised Clubcard Prices resulted in an improved performance across the period, with Christmas sales actually rising by 1.6%.

Tesco cut nearly 2,700 prices across the third quarter, helped it to increase its market share by 73 basis points to 24.5%, rising to 27.9% by Christmas. Meanwhile, Tesco Finest sales were up 16.7% on last year including a record Christmas week.

"We stepped up our investment in service over the key festive period, with more colleagues on the shop floor, helping to deliver market-leading availability and making this our best Christmas yet," said chief executive Ken Murphy.

Over in the Tesco Bank division, sales were up 32.8% on last year in the third quarter, helped by the higher interest-rate environment and higher lending, while the insurance unit was helped by high levels of both renewals and new business.

"Our powerful combination of great value, quality, availability and service means that we head into the New Year in great shape to keep delivering for customers," Murphy said.