Tesco shares fall on weaker than expected Christmas sales growth

Tesco shares fall on weaker than expected Christmas sales growth

Tesco shares fall on weaker than expected Christmas sales growth

Tesco saw its biggest ever sales week in the United Kingdom over Christmas, with 58 million customer transactions and 770,000 online grocery deliveries in one week.

CEO Dave Lewis' strategy implementation is yielding results - 2017 saw strongest Christmas sales since former head Leahy's departure in 2010 - however the negative reaction stems from United Kingdom like-for-like sales during the key period coming in at 1.9%, well shy of 2.8% consensus, weaker than even the lowest estimate of 2.0%.

Chief executive Dave Lewis said the retailer "continued to outperform the market" in the 19 weeks to 6 January 2018. The general merchandise category includes all non-food items but excludes clothing.

It added that trading since December 23 has been mixed following "disappointing" sales in the week after Christmas, although it has halted sales declines in store and online since New Year's Day.

"That's probably a result of consumers tightening their belts when it comes to grocery shopping, and the strong performance of supermarket premium ranges suggests when customers are splashing out, they are increasingly doing it at Sainsbury's, Tesco and Morrisons rather than at M&S".

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Like-for-like sales and volumes in fresh food in the United Kingdom were up by 3.7 per cent, driving overall like-for-like sales growth in the country to 1.9 per cent.

It was the Retail sector that prevented the FTSE pushing higher, despite Sterling's weakness, on trading updates from Tesco and Marks and Spencer.

The supermarket says its efforts to pass on less inflation to its consumers compared to rivals could be behind its sales performance.

In the third quarter of the group's financial year - the period that spans the 13 weeks to 25 November - Tesco recorded like-for-like sales growth of 2.3 per cent for that region. The engineering firm said that changes in US taxes will result in a one-off non-cash tax credit for 2017.

Lidl claimed it was the "fastest growing supermarket" over Christmas after booking a 16% leap in festive sales in December, although it did not give a breakdown of like-for-like sales.

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