Tesco raises profit outlook for second time in four months

Retailer Tesco on Thursday raised its profit outlook for the second time in four months as it reported a rise in Christmas sales despite a tough comparative with 2020 when spending was boosted by a Covid-19 lockdown.

The group said UK like-for-like sales rose 0.2 per cent year-on-year in its third quarter to November 27th and were up 0.3 per cent over the six weeks to January 8th. As a result of stronger than expected sales to date Tesco now expects a full-year 2021-22 retail operating “slightly above” the top-end of its previous £2.5-2.6 billion (€3 -€3.1 billion) range.

In the Republic, sales rose by 0.3 per cent over the Christmas period, but declined by 3.3 per cent in the third quarter. Tesco said it had the highest share growth in the market over the Christmas period, including a strong online performance.

Sales in the Republic in the 19 weeks to January 8th (the third quarter plus Christmas period trading) amounted to £937 million, which was 1.8 per cent lower year on year on a constant currency basis.

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Tesco Ireland’s chief executive Kari Daniels said she was “really pleased” with the performance of the business during the Christmas season.

“A significant driver of our growth has been the investment we’ve made in our home delivery and click and collect services in stores nationwide generating thousands more slots for customers. Our over-65-year-old customers remain a priority for free home delivery.”

Profit upgrade

Tesco's profit upgrade follows one from rival Sainsbury's on Wednesday and bullish updates this week from the UK arms of German discounters Aldi and Lidl.

UK supermarkets faced tough comparisons against Christmas 2020 when a lockdown meant food and drink sales boomed. While restrictions for Christmas 2021 were less severe, supermarkets still benefited from consumer nervousness over the spread of the Omicron variant which kept them away from bars and restaurants.

Tesco, which has a near 28 per cent share of Britain’s grocery market, said third-quarter UK like-for-like sales were up 6.9 per cent against the same period in 2019-20, before the pandemic impacted trading. Sales over the six week Christmas period were up 8.8 per cent on the same basis.

The group said it outperformed the market and grew market share.

Tesco forecast full-year operating profit for its bank to be between £160 million and £200 million, due to the effect of more favourable economic forecasts on its provision for expected credit losses. – Reuters