Tesco sees strong Christmas sales, maintains guidance

Investing.com — Tesco (OTC:TSCDY) on Thursday delivered strong results in its Q3 and Christmas trading update, especially in its core UK grocery business and sustained growth across key markets. 

However, the company has maintained its full-year guidance, reflecting a cautious stance despite strong trading momentum. 

“We delivered our biggest ever Christmas, with continued market share growth and switching gains,” said Ken Murphy, chief executive at Tesco.

Shares of the British retailer were down 1.6% at 03:48 ET (08:48 GMT).

Tesco’s ongoing investments in customer satisfaction, value, and innovation have been instrumental in driving its market share and like-for-like growth.

Tesco reported strong performance across key markets, with UK Q3 like-for-like sales up 3.8% and Christmas sales rising 4.1%. 

In the Republic of Ireland, Q3 LFL sales grew 4.2%, with Christmas accelerating to 4.8%, both ahead of forecasts. 

Booker rebounded from a 2.6% Q3 decline to 1.4% growth at Christmas, beating expectations. 

Central Europe outperformed, with Q3 LFL sales up 2.8% and Christmas surging to 4.7%, boosted by a 70-basis-point calendar benefit in Slovakia.

Despite the strong trading results, Tesco has maintained its full-year EBIT guidance of “around £2.9 billion,” in line with its previous projection and close to consensus estimates of £2.96 billion. 

Retail free cash flow is expected to remain within the range of £1.4 billion to £1.8 billion, aligning with the consensus of £1.69 billion. 

Tesco reiterated that its ongoing investments in customer experience and value are driving volume momentum and positioning the company for sustainable long-term growth.

The cautious stance on guidance may reflect an overabundance of prudence, as per analysts at Jefferies, especially given the strong trading results. 

Jefferies views any short-term pullback as a compelling buying opportunity, flagging Tesco’s potential for financial compounding.

Food sales grew by 4.7%, driven primarily by volume growth, particularly in fresh food categories. Non-food sales, excluding toys, also rose by 4.0%, with strong contributions from home and clothing segments.

Online sales surged by 10.8%, with market share increasing by 122 basis points. Tesco Whoosh recorded over 1.2 million orders during the festive season. Additionally, Tesco’s Winter Food Collection facilitated the donation of 1.9 million meals to food banks.

In the Republic of Ireland, fresh food performance remained a key driver, supported by the ongoing rollout of the ‘fresh first’ refresh program.