A solid Christmas performance at Tesco

published 16 January 2009

"It was billed as Tesco's worst Christmas for more than a decade," said Richard Fletcher in The Daily Telegraph. But take into account November's VAT cut, "and it was actually the worst performance since... last Christmas". Tesco's results were bang in line with City forecasts, with like-for-like sales up 3.5% in the seven weeks to 10 January. Last year it achieved 3.1%.

But with consumers ready to batten down the hatches, "it looks like it is going to be a very tough year ahead", said Andrew Higginson, the supermarket's outgoing finance director. Sales at discount stores such as Aldi rose 22% in December, providing stiff competition for Tesco's recently introduced "discount brand" line. Given that shoppers like consistency and simplicity, the new range could be the "first big mistake that Tesco has made in a decade", reckoned Planet Retail commentator Bryan Roberts.

But so far the initiative appears to be paying off, said Lex in the FT; witness the improvement in the group's Christmas sales from the previous quarter. Nor does the spurt in discount store sales "foreshadow a lasting structural shift". Aldi's market share rose from 2.6% in 2008 to 3%, "good for the year but hardly stunning after a decade and a half in the UK". And while Tesco might lag Sainbury's and Asda in sales growth at the moment, it is storming ahead abroad, with group sales up 11.6% in the Christmas period, thanks to strong international growth. "There are very few companies of Tesco's size," said David Wighton in The Times, "who can boast anything like that."