Tesco expects profits at upper end of guidance despite sales slowdown

(Sharecast News) - Supermarket giant Tesco said it expects full-year earnings to be at the top end of forecasts despite a slowdown in underlying sales growth over the key Christmas selling season. Group like-for-like sales were up 2.4% over the six weeks to 3 January, easing from the 3.1% growth seen over the third quarter to 22 November and the 4.6% jump registered in the second quarter.

Underlying sales growth across the UK slowed to 3.2% over Christmas from 3.9% over the third quarter, though the company still managed to increased its market share over the festive week to 29.4% - its highest in over a decade.

The grocer said fresh food had a "standout performance" in the UK during the third quarter, with LFL sales up 6.6% due to its investments in value and quality, while home and clothing sales rose 2.1% and online sales rose 11.2%.

Across the UK and Republic of Ireland combined, sales growth over the 19-week period was 3.8%, while Central Europe sales rose 1.0%.

However, at its wholesale distribution company Booker, LFL sales fell 1.3% during the period, with a 0.9% decline in the third quarter followed by a 2.1% drop over Christmas, which Tesco partly blamed on the end of a lower-margin national account in August.

Nevertheless, annual adjusted operating profit is now being tipped to come in at the upper end of its £2.9bn to £3.1bn guidance range.

"I am delighted with the strong Christmas we delivered for our customers. Our investments in value, quality and service drove further gains in customer satisfaction and strong growth in fresh food, contributing to our highest UK market share in over a decade," said chief executive Ken Murphy.

"Competition is as intense as ever and we know value remains a priority for customers. We are determined to help customers make their money go further, and earlier this week expanded our Everyday Low Prices commitment to over 3,000 branded products, sitting alongside Aldi Price Match on more than 650 lines and thousands of exclusive offers through Clubcard Prices."