Tesco beats expectations in Christmas trading

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Tesco stepped up the pressure on its rivals yesterday with a Christmas performance that was better than expected, despite a rapid slowdown in overseas growth.

Britain’s biggest retailer hailed its best Christmas performance in three years as it closed the domestic gap with Asda, J Sainsbury and Wm Morrison.

However, the City was surprised by the speed at which Tesco’s international expansion tailed off. Tesco said that tough economic conditions in Central Europe and the anniversary of a big acquisition in South Korea depressed international sales growth.

Laurie McIlwee, Tesco’s chief financial officer, said that its enhanced Clubcard loyalty scheme was helping it to recover lost ground on home turf without having to resort to extra promotions to attract customers. He said: “We have had to compete with others who have had a strong emphasis on promotional activity. We’re not seeing an increase, we’re seeing a reduction, in [promotional] participation as Clubcard starts to gain more traction.”

Like-for-like UK sales rose 4.9 per cent in the six weeks to January 9, with total sales up 8 per cent, excluding fuel.

Tesco said that doubling the discounts available through its Clubcard offer had helped to stop “promiscuous” customers from shopping around for the first time during the recession. “Tesco customers are doing more of their shop in a Tesco store,” Mr McIlwee said. “They have been rewarded by Clubcard and, of course, that’s self-perpetuating.”

Even including the 0.7 percentage point contribution from Clubcard vouchers, which some City analysts argue should not be included in sales figures, Tesco’s British like-for-like sales growth is on a par with Sainsbury’s sales growth and may have overtaken that of Asda, after having lagged behind both throughout 2009.

Analysts said Tesco’s international trading was worse than expected. Total sales rose 4.1 per cent, excluding exchange-rate movements, down from 5.4 per cent in the previous quarter. Growth in Asia fell from 26.9 per cent in the year’s first half to 7.8 per cent.


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