Tesco has confirmed its earlier guidance for full-year operating profit of between £2.4bn and £2.5bn after seeing good growth in sales over Christmas.
Like-for-like sales at its UK stores were up 7.2% as consumers stocked up for the festive period. Although the sales growth was driven by rising prices rather than people buying more, the supermarket chain said in a trading statement that there was strong demand for budget items as well as its more expensive Finest range.
For the third quarter and Christmas combined — the 19 weeks ended 7 January 2023 — like-for-like sales at Tesco’s UK stores were up 5.3% compared with the same period a year ago.
The retailer maintained its leading share of the market at 27.5% and said it was the only major supermarket to grow its market share versus pre-pandemic levels.
It comes as soaring costs for food and energy continue to put pressure on household budgets.
Tesco chief executive Ken Murphy, quoted by Sky News, said he “thinks and hopes” that food inflation, which reached a record high in December, will start to ease in the second half of the year.
There was a mixed reaction from investors this morning to Tesco’s earnings report, according to Joshua Raymond, director at online investment platform XTB.com.
“The food retailer kept its full-year guidance unchanged with operating profit expected to come in around £2.45bn, so there was a lack of any positive surprises in the report,” Raymond said.
“Moreover, its sales growth was in line with similar rises at rivals such as Sainsbury’s and broadly in line with similar growth patterns in previous periods. So with that in mind, there’s not really much in the report to get investors overly excited and as such it’s no surprise to see a mixed reaction.
“Shares initially opened lower before trading back towards flat on the day and have been on an upward trajectory over the past three months, rising back towards 242p having hit a six-year low in October last year. For now, a somewhat boring trading update is probably welcome news for long-term investors.”
