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Tesco PLC shares weak reflecting some disappointment at Christmas sales mix

Tesco only saw its group like-for-like sales increase by 0.3% over the Christmas trading period, with 0.7% growth in the UK, but a 1.2% decline internationally.
Tesco store
Tesco said group like-for-like sales in the 13 weeks to November 26 grew by 1.5% year-on-year

Tesco PLC (LON:TSCO) saw its shares fall back in early trading today as Britain’s biggest supermarket group continued the sector’s run of Christmas trading updates, reflecting some profit-taking and a little disappointment at the festive mix.

Around 9am, Tesco shares on the FTSE 100 index were down over 2%, or 4.5p at 204.3p.

Neil Wilson, senior market analyst at ETX Capital, said: “Optimism from Sainsbury’s and Morrisons good results earlier this week had fuelled some buying but looks like Tesco has not delivered anything extra.”

Quarter up ...

Tesco said group like-for-like sales in the 13 weeks to November 26 grew by 1.5% year-on-year, with UK like-for-like sales up 1.8% and international like-for-likes ahead 0.6%.

However over the Christmas trading period, which covered the six weeks to January 7, Tesco only saw its group like-for-like sales increase by 0.3%, with 0.7% growth in the UK, but a 1.2% decline internationally.

Tesco said its fresh food ranges were particularly popular in the UK, but that Christmas trading in the international business was weakened by a strong seasonal performance the year before, plus weaker consumer spending in Thailand.

The firm also flagged up strong performances in clothing and toys, with sales in those segments up 4.3% and 8.5% respectively.

Independent retail analyst Nick Bubb pointed out: “The Q3 today shows further good progress, with the UK up by 1.8%, although the shift of a Clubcard promotion meant that Xmas sales were only up by 0.7% LFL.”

And Nicholas Hyett, equity analyst at Hargreaves Lansdown:, said: “There are signs that the giant might be stirring once again, but a slow down over the Christmas period will leave many investors worrying whether the group can achieve sustained growth.

“It’s not an entirely surprising problem, as comparatives between the two periods are very different. A year ago Q3 sales fell 1.5%, whereas Christmas sales rose 1.3%. Promotional changes appear to have played a part in slower sales too.”

Boss encouraged …

But Dave Lewis, Tesco’s chief executive, remnained upbeat, saying: “We are very encouraged by the sustained strong progress that we are making across the Group.  In the UK, we saw our eighth consecutive quarter of volume growth and delivered a third successful Christmas.”

The group also trumpeted its first quarterly market share gain since 2011.

Lewis added: "We are well-placed against the plans we shared in October to become more competitive for customers, simpler for colleagues, and an even better partner for our suppliers, whilst creating long-term value for our shareholders.”

READ: Sainsbury’s Christmas update ..

READ: Morrisons’ Christmas update ..

Tesco’s update follows yesterday’s modest sales growth recorded by the supermarket sector's number two company J Sainsbury plc (LON:SBRY), which eked out a 0.1% like-for-like rise against expectations for a fall.

On Tuesday, Britain’s fourth-biggest supermarkets group William Morrison PLC (LON:PLC) posted the strongest rise of the big players, seeing its Christmas like-for-like sales rise 2.9%, smashing forecasts and leading the Yorkshire-based firm to raise its profit estimates.

The UK supermarket leaders have been locked in a price war battle to combat the advance of German-owned discount chains, Aldi and Lidl - which reported even stronger Christmas performances this week - but the return of food price inflation following a slump in the pound since the Brexit vote looks to be helping to revive them.

 -- Adds share price, broker comment --

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