Festive January for UK’s Tesco after bumper Christmas

London — Tesco, Britain’s biggest supermarket group, kept its full-year profit outlook on Thursday as it reported a 4.1% rise in underlying UK sales for the key Christmas trading period, winning market share from rivals.

Under CEO Ken Murphy, the group is reaping the rewards of a programme to improve the value and quality of its products, step-up innovation and enhance its customer service.

“We delivered our biggest ever Christmas, with continued market share growth and switching gains,” he said.

Industry data published on Tuesday showed Tesco ended 2024 with a UK grocery market share of 28.5%, up 80 basis points on the year and its highest level since January 2016.

Tesco, whose shares are up 23% over the last year, has benefited from a strategy of matching the prices of discounter Aldi on some products and the popularity of its Clubcard loyalty scheme, which provides lower prices for members. These programmes are being financed by efficiency savings, with £500m targeted for 2024/25.

The group is also continuing to benefit from the trend of consumers eating more at home rather than dining out, with sales of its “Finest” premium range up 15.5% over the Christmas trading period.

Tesco said third-quarter to November 23 UK like-for-like sales rose 3.8%, having been up 3.5% in its second quarter. Growth accelerated to 4.1% in the six weeks to January 4.

The group said it still expected retail adjusted operating profit, its preferred profit measure, of “around £2.9bn” for its year to February 2025, up from the £2.76bn made in 2023/24.

Tesco does, however, face a jump in costs in its 2025/26 financial year due to increased social security payments imposed in the new Labour government's first budget last October, a hike in the national minimum wage and new packaging levies.

Reuters