Tesco reported record sales in the four weeks leading up to Christmas, but its results for the third quarter were hit by the loss of a key tobacco supplier and poor general merchandise sales.
Like-for-like sales for the UK and Ireland - which compare performance across the same stores – grew 1.9 per cent in the crucial six-week festive period to 6 January, driven by a rise of 3.4 per cent in food sales. 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.
However, the supermarket giant said its performance was hurt by poor general merchandise sales and the collapse of wholesaler Palmer & Harvey, which exerted a strain on its distribution network and hit tobacco sales. The general merchandise category includes all non-food items but excludes clothing.
Wholesaler Palmer & Harvey fell into administration last November with the loss of 2,500 jobs after attempts to restructure the business proved unsuccessful.
Tesco chief executive Dave Lewis said that the fallout from that had created challenges which had taken “the shine off an otherwise outstanding performance for the period as a whole”. Those challenges, however, had “now been resolved”.
Mr Lewis said that, particularly in fresh food, Tesco had managed to outperform the market throughout the Christmas period.
“Our trading momentum accelerated across the third quarter and into December, with the four weeks leading up to Christmas Day delivering record sales and volumes in the UK,” he added.
Across central Europe, Tesco reported a 0.8 per cent increase in like-for-like sales in the third quarter compared to 2016. Its Asia business suffered 9.6 per cent slump in sales over that period, but the group overall internationally posted a 0.9 per cent increase in the 13 weeks to 25 November, and a 0.1 per cent rise in sales over the six-week Christmas period.
Tesco, which is due to report full-year results on 11 April, said it was confident in its outlook for the full year and was firmly on track to deliver its medium-term ambitions.
