Tesco posts record Christmas sales, but Covid-19 costs rise – business live

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Like-for-like sales at Tesco up 8.1% over ChristmasBut Covid-19 costs now expected to reach £810m

8.15am GMT

Here’s some early reaction to Tesco’s results.

Retail analyst Nick Bubb:

Tesco has claimed “market-leading” performance for its 8.1% LFL sales growth in the UK over the 6 weeks to Jan 9th (even though that looks only par for the course): profit guidance for the year is unchanged.

“Supermarkets are one of the few businesses that have managed to trade through everything that Covid-19 has thrown at the economy over the past year – it should perhaps be no surprise then that, like Sainsbury’s last week, Tesco’s has performed well.

Sales growth has been particularly strong in the UK and Ireland, offsetting the additional costs that the pandemic has brought about and an understandable slowdown at Booker, as restrictions hit end-customers.

“Tesco has followed its Big Six rivals with strong sales growth over the Christmas period. And while the short term profits from these increased sales will be held back by the costs associated with COVID-19, including establishing its online offer - doubling its delivery slots, and creating thousands of new jobs to meet increased demand - it is better placed to succeed long-term than its competition.

“Tesco has outpaced its rivals when it comes to building brand trust; it was one of the first brands to launch a campaign promoting its social-distancing measures at the start of the Covid pandemic, and pivoted quickly to refresh its popular ‘Food love stories’ towards lockdown inspired tales.

Tesco has enjoyed a strong growth in 2020 thanks to increased consumption, savings across promotional activity and, reputational improvement.”

“Pricing has been strong through the pandemic, with the percentage of goods on discount dropping from c.40% to c.20%. Looking forward, the company is set to benefit from inflationary increases, with experts forecasting a 3-5% rise in food inflation during 2021.”

8.12am GMT

Although its supermarkets have been super busy, Tesco’s food wholesale arm, Booker, has been hit by the Covid-19 lockdowns.

Like-for-like sales at Booker fell 8.3% over the six weeks to January 9th (the Christmas trading period). Sales to caterers have been (predictably) hurt by the closure of hospitality venues.

Catering performance has been strongly correlated to the severity of UK COVID-19 restrictions including a recovery following the ‘Eat Out to Help Out’ scheme leading into the start of the third quarter.

As restrictions have tightened, the severity of the decline in the hospitality sector overall led to a fall in our catering sales of (49)% on a like-for-like basis over the Christmas period, compared to around (30)% for the third quarter. We continue to outperform the catering industry as a whole.

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