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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Tesco posts record Christmas sales; US jobless claims jump – as it happened

The Tesco store at Taplow in Buckinghamshire.
The Tesco store at Taplow in Buckinghamshire. Photograph: Maureen McLean/REX/Shutterstock

Closing summary

Time to wrap up.

Tesco has emerged as a Christmas winner, on a busy day for UK retailers’ financial results.

The supermarket giant grew its UK like-for-like sales by 8.1% over Christmas, but also reported that the cost of Covid-19 have risen to around £810m. Analysts said Tesco was well-positioned for 2021, although its banking service and its Booker wholesale divisions both suffered from the pandemic.

Bike and motor business Halfords, and online musical instrument seller Gear4Music, also posted strong results -- but Primark faces losing at least £1bn in lost sales from the lockdown.

The US jobs market has deteriorated again, with over one million people filing new jobless claims last week.

The initial claims total surged to 965,000, while another 284,000 self-employed people sought help through the PUA scheme. Economists and investors said the figures showed the US economy needs more help.

Stocks have risen to record levels on Wall Street, as investors anticipate Joe Biden pushing through a huge stimulus programme.

Shares in UK travel companies also rose, on reports that over-50s were booking trips abroad in preparation for being vaccinated against Covid-19.

Pimlico Plumbers, the London-based plumbing service, is introducing a “no jab, no job” policy requiring all of its workers to be vaccinated against Covid-19. One lawyer isn’t impressed....

Germany’s economy has suffered its worst year since 2009, with GDP falling 5% during 2020. Economists said Europe’s largest economy had coped relatively well, but is likely to shrink again this quarter as lockdown measures continue to be enforced.

And musician Mick Fleetwood has become the latest star to sell his royalty rights.

Goodnight. GW

In London, the FTSE 100 index of blue-chip share has closed 56 points higher at 6801 points.

That’s a gain of 0.8%, ending a three-day losing streak.

Wall Street is having a solid day too, with the Dow and the Nasdaq hitting record levels on the prospect of more stimulus measures.

Travel companies rally as over-50s 'plan post-vaccine holidays'

Travel stocks are having a good day in the City, amid optimism that foreign trips could soon be back on the calendar.

Holiday firm TUI has reported a jump in bookings from over-50s -- indicating they are making plans for once they’ve been vaccinated.

TUI UK managing director Andrew Flintham said:

“We’re seeing more interest in holidays from an age group that wasn’t coming through before, with the over 50s starting to book, we assume, on the back to the positive vaccine news.”

Yesterday, prime minister Boris Johnson said the UK would roll out 24/7 vaccinations centres, as part of the push to achieve two million jabs per day. Under the government’s plan, all over-50s should be offered the vaccine by the end of spring.

Shares in TUI are up 3.8% today, while British Airlines owner IAG is up 6%, budget airline easyJet has gained 7.7% and cruise operator Carnival has risen 7%.

Back in the markets, cryptocurrency prices are rising again - recovering from their plunge at the start of the week.

Bitcoin, which tumbled back to almost $30,000 on Monday, is now close to $40k again (near last week’s record just below $42,000).

Craig Erlam, senior market analyst at OANDA Europe, says:

Bitcoin is continuing to recovery from its plunge earlier this week and is already closing in on $40,000 once again. It should come as no surprise to anyone that bitcoin has bounced back so quickly. We know it’s an extremely volatile instrument, the only difference this time is the absolute numbers are now much larger due to its growth over the last month.

The moves earlier this week was not the bubble bursting, it was barely a correction by bitcoins own standards. It was a reminder of the downside risks in the space. There will be plenty more bad days ahead but as we’re seeing now, bitcoin bulls are not deterred and we could see more significant gains in the very near future. We could see an interesting psychological test around $50,000 which, the way this now moves, may not be far away.

Mick Fleetwood sells music royalty rights to BMG

Fleetwood Mac in 1975: John McVie, Christine McVie, Stevie Nicks, Mick Fleetwood, and Lindsey Buckingham (left to right).
Fleetwood Mac in 1975: John McVie, Christine McVie, Stevie Nicks, Mick Fleetwood, and Lindsey Buckingham (left to right). Photograph: Michael Ochs Archives/Getty Images

Another day another big name music rights deal as Fleetwood Mac co-founder Mick Fleetwood sells his interest in recordings including global hits Dreams and Go Your Own Way to music publisher BMG.

Fleetwood has sold the rights to the royalties from over 300 recordings spanning albums including Fleetwood Mac, Rumours and Tango In The Night.

The deal means that BMG will also cash in on the royalty proceeds of the success of Dreams on video sharing site TikTok, which became a global viral hit when a middle-aged skater posted a video of him skating while lip-syncing to Stevie Nicks’s vocals.

The video was viewed almost 3 billion times on TikTok and prompted a surge of almost 200m streams of the song and 86,000 sales of the album Rumours in the US, 43 years after its release.

Fleetwood is the latest big name star to sell his music royalty rights as artists look to cash in on investors in turn aiming to capitalise on the value hit songs have in the streaming era.

Justus Haerder, executive vice president of group strategy and M&A at BMG, said:

“This acquisition highlights the value of timeless recordings in a streaming market which is increasingly benefitting established rather than newer artists.”

On Wednesday, Shakira announced that she had sold the publishing rights to her 145-song catalogue, which includes global hits Hips Don’t Lie and Whenever, Wherever to Hipgnosis.

Last week Hipgnosis, the London-listed music royalties investment firm, announced three deals including a 50% share in Neil Young’s 1,180 song catalogue and that of former Fleetwood Mac guitarist Lindsay Buckingham.

Last year Stevie Nicks, the Fleetwood Mac singer and solo artist, sold a majority stake in her catalogue for $100m to the music publisher Primary Wave.

The biggest deal to date was announced last month when Bob Dylan sold the publishing rights to his entire catalogue of songs, including Blowin’ in the Wind and Knockin’ on Heaven’s Door, to Universal Music for an estimated $300m.

Updated

Wall Street has opened higher.

Investors continue to anticipate a chunky stimulus package from the Biden administration - shrugging off the latest signs that the labor market is struggling.

  • Dow: up 82 points or 0.27% at 31,142
  • S&P 500: up 5.7 points or 0.15% at 3,815
  • Nasdaq: up 52 points or 0.4% at 13,181

Heidi Shierholz of the think tank Economic Policy (and former chief economist at the US Department of Labo) has written a handy thread on today’s jobless figures:

The number of ‘continuing claims’ for unemployment benefit also rose last week, from 5m to 5.27m.

That shows that more Americans have been receiving jobless support for at least a fortnight - even though many have now received the maximum entitlement and dropped off this total.

This latest jump in US unemployment claims highlights the urgent need for a large new stimulus package, says Neil Birrell, Chief Investment Officer at Premier Miton Investors.

“The US initial jobless and continuing claims came in way worse than expected. Employment is a crucial indicator of the economy and it has not been giving many positive signals for a while now.

This is a step backwards. Even if there are anomalies in the data it looks like the virus is increasing in its impact. The Biden COVID relief package will need to be big and come soon; markets will demand it.”

President-elect Biden is due to unveil his plans later today. Reuters reports that the package has a price tag above $1.5 trillion and includes a commitment for $1,400 stimulus checks.

In another bad sign, the number of freelancers and self-employed people filing for unemployment support in America has also risen.

Around 284,000 new claims to the US Pandemic Unemployment Assistance programme were made last week - on top of the increase in initial claims.

US jobless claims soar

The number of Americans filing new unemployment claims has jumped sharply, in a fresh sign that the US economy is struggling as the Covid-19 pandemic rages.

The ‘initial claims’ total surged to 965,000 last week (to Saturday 9th January) on a seasonally adjusted basis. That’s an increase of 181,000 compared to the previous seven days.

It’s much higher than expected - economists had forecast a small rise in new jobless claims, to around 795,000.

If you strip out seasonal adjustments, the picture is even worse. More than 1.15 million people filed new initial claims -- a jump of 230,000 on the previous week:

Full story: Tesco hails record Christmas

Tesco has hailed a “record” Christmas on the back of booming online sales and customers treating themselves to its luxury Christmas food ranges.

The UK’s biggest supermarket said sales at stores open one year were up 8.1% over the key six-week Christmas trading period. That was a step up from growth of 6.7% over the three months to 28 November.

Ken Murphy, the Tesco chief executive, described the performance over the six weeks to 9 January as “market-leading”, adding: “We delivered a record Christmas across all of our formats and channels.” The “unprecedented demand for online groceries” meant the company delivered more than 7m orders containing 400m-plus items over Christmas.

Murphy also revealed there were some gaps on in its shelves in Northern Ireland and the Republic of Ireland as the supermarket chain grappled with new post-Brexit border controls. The problem was focused on products, such as ready meals and processed meats, which have a short shelf life, as well as citrus fruits. Tesco has hired a veterinary agency to certify products before they cross the border.

Murphy said:

“We are working with government on both sides of the Irish Sea to smooth the flow of products and I would say that our availability in both markets remains strong.

The disruption is limited to certain categories, with a particular emphasis on some short shelf-life products where every hour, let alone every day counts.”

The company was also experiencing “teething problems” at the main Channel crossing, which about a tenth of the food consumed in the UK is transported.

“Inevitably there are the bedding issues that you would expect with any new process that’s been set up as a relatively short notice,” said Murphy.

“We’re working our way through and we would hope over the coming weeks and months that we will end up with a much smoother flow of product.

Norwegian axes long-haul flights and cuts 1,100 Gatwick jobs

Norwegian has announced it will no longer fly long-haul routes, even after the pandemic, bringing an end to its low-cost, long-haul vision and spelling the loss of about 1,100 jobs based at Gatwick airport.

The airline said it would retrench to a short-haul European network and domestic Norwegian routes for good, as it outlined its business plan for survival.

About 2,150 jobs in the UK, Spain, France and the US will be axed, with one union warning that the airline industry is in an employment “death spiral”....

More here:

German economy shrinks 5%: more reaction

Deutsche Bank analysts say Germany has handled the Covid-19 pandemic relatively well, by only shrinking by 5% last year (see earlier post) - the worst since the financial crisis.

Germany has - so far - mastered the pandemic much better than other large EMU countries.

According to the first estimate by the Federal Statistical Office, the impact of the COVID-19 pandemic resulted in a GDP decline of 5.0% in 2020 (consensus -5.2%), which is – contrary to concerns back in spring – less than the -5.7% decline recorded in 2009.

We keep our +4.5% GDP forecast for 2021. While the economy seems to have performed better towards the end of last year, as suggested by the smaller-than-expected annual decline in 2020, the outlook for Q1 2021 has become more clouded, given the extension of the lockdown until the end of January and – more importantly – indications by key politicians that at least some of the measures could be extended until Easter, given the unabated pandemic.

RBC Capital Markets told clients this morning that:

With its large (and Asian focused) manufacturing sector, and comparatively successful response to the pandemic, Germany has been less hard hit than other euro area economies.

Lawyer: Don't force your staff to be vaccinated

Jonathan Chamberlain, employment partner at law firm Gowling WLG, says employers should not force staff to take a Covid-19 vaccine, following Pimlico Plumbers’ move.

“This is not the way to go. For a start it doesn’t achieve anything: the Coronavirus restrictions apply regardless of vaccination status; it makes no difference to what an employee’s allowed to do if they’re vaccinated, so how can any private employer say their staff must be treated?

Employees can refuse and, if they get fired as a result, they’re likely to have strong claims against their employer, potentially some very expensive ones. As the law currently stands, not even the Government can insist the general public get vaccinated so the courts are unlikely to have much sympathy with a private employer who tries to force their staff to have the jab.”

Pimlico Plumbers will introduce a “no jab, no job” policy requiring all of its workers to be vaccinated against Covid-19.

Charlie Mullins, Pimlico’s founder and former chief executive, now chairman, said the company’s lawyers were drafting new employment contracts for its 400-strong workforce to include the vaccine requirement.

Governments around the world have started major programmes after regulators approved a series of vaccinations. The UK had given more than 2.6 million people the first dose of a vaccine by Tuesday.

Extensive medical trials have found the vaccines approved by UK regulators are safe. However, there are concerns that the increase in hesitancy and so-called anti-vaxxers around the world will lead to lower vaccination rates, risking further coronavirus outbreaks and potentially endangering the lives of others.

“No vaccine, no job,” Mullins said in an interview with City A.M. “When we go off to Africa and Caribbean countries, we have to have a jab for malaria – we don’t think about it, we just do it. So why would we accept something within our country that’s going to kill us when we can have a vaccine to stop it?”

Germany economy suffers worst year since financial crisis

Over in the eurozone, Germany’s economy has recorded its worst year since 2009 -- but did rather better than the UK.

German GDP shrank by 5.0% last year, according to preliminary estimates from the Federal Statistical Office (Destatis).

That ends a decade-long run of growth, and is the first annual fall in output since the 5.7% contraction in 2009, after the financial crisis caused a global recession.

Destatis says:

After a ten-year growth period, the German economy suffered a deep recession in 2020, the year of the corona, a situation similar to that of the 2008-2009 financial and economic crisis.

In contrast, the UK is expected to suffer its worst annual slump in 300 years, with GDP forecast to fall over 11% in 2020.

Katharina Utermöhl of Allianz says today’s data suggests Germany’s economic activity held up relatively well in the final quarter of last year despite the second lockdown.

But, she also predicts the economy will shrink this quarter, due to the latest restrictions, followed by a boom in the second half of 2021.

Utermöhl explains:

The economic roller coaster ride looks set to continue: The German economy is in for a sharp growth setback in early 2021.

German GDP largely stagnated in Q4 2020 as the “lockdown light” approach pursued between November and mid-December, together with a resilient manufacturing sector – thanks in particular to a tailwind from Chinese export demand – helped contain the adverse impact on the economy. However, with notably tighter Covid-19 restrictions in place since mid-December, things will get worse before they get better in 2021.

Overall, we maintain our GDP growth forecast of +3.5% for 2021 – while acknowledging elevated downside risks for H1 should the lockdown be tightened further and/or be prolonged and for H2 should the vaccination rollout fall behind our expectations.

In 2022, we expect GDP growth to remain notably above potential at +3.8% as the achievement of herd immunity would allow for a return to economic normalcy while monetary and fiscal policy remain supportive. As a result, the German economy should reach its pre-crisis GDP level in H1 2022, whereas other economies in the Eurozone, including Spain and Italy, will need an additional year to heal.

Whitbread leads FTSE 100 higher

After a quiet few days, the London stock market has pushed higher this morning.

The FTSE 100 has gained 40 points, or 0.6%, to 6786, back towards the 10+ month highs set last week.

Whitbread is the top riser, up 4.3%, while Tesco’s shares are down 0.5%.

Among the smaller companies reporting today, Dunelm is down 7.3% while Halfords has jumped 6.6%.

The pandemic has also created a jump in demand for musical instruments, as people use their lockdown time to develop new skills (or perhaps relearn old ones).

Gear4Music, the UK’s largest online retailer of musical instruments and music equipment, has reported a jump in sales in the run-up to Christmas, with guitars and keyboards, and home recording kit particularly popular.

The York-based firm told the City that profits will beat forecasts this year, after it grew its total sales by 30% in the last three months of 2020.

Gross profits in the quarter were up 47% (from £10.6m to £15.6m), and it now expects full-year earnings to be ahead of expectations, and not less than £16.5m (up from £7.8m last year).

Gear4Music’s sales
Gear4Music’s sales Photograph: Investegate

The lockdown is an ideal opportunity to get to grips with guitar chords, or the piano, but it’s not so great for orchestral players. Gear4music’s chief executive officer Andrew Wass hopes that demand for orchestral instruments will rise too, once people can gather together again.

“I am pleased to report a very successful FY21 peak trading period, that continues to reflect the significant commercial and operational progress that we have made during the last two years, alongside the continuing hard work and commitment of our staff.

Strong growth during the period has been driven by products that can be used and played at home, including Guitars, Keyboards and Home Recording equipment. We know many of our customers are looking forward to rehearsing and performing together again, and as social distancing restrictions are eased, we expect our Live Sound, Drums and Orchestral categories to return to stronger growth.

Shares have jumped over 5% today, extending their strong rally since the first lockdown began.

Gear4Music’s share price
Gear4Music’s share price Photograph: Refinitiv

Whitbread's Covid-19 job cuts smaller than feared

A Premier Inn in Doncaster, northern England.
A Premier Inn in Doncaster, northern England. Photograph: Paul Ellis/AFP/Getty Images

The pandemic has forced Whitbread, the hotel and restaurant group, to cut 1,500 jobs in a restructuring drive.

Although a grim toll, that’s actually rather less than the 6,000 which was initially feared, after the hospitality industry was battered by Covid-19.

Whitbread, which owns Premier Inns hotels and Beefeater and Brewer’s Fayre restaurants in the UK, told the City that some staff had agreed to cut working hours instead.

We continue to take action to ensure our cost base is reflective of the current demand environment, including completing the restructure of our hotel and restaurant operations teams that has resulted in 1,500 colleagues leaving the business.

This is less than the maximum number of redundancies previously indicated (6,000), however targeted cost savings were still achieved as a result of a greater proportion of colleagues accepting a reduction in maximum contracted hours.

Like-for-like sales in the UK were down 55.5% in the last quarter (to 26 November), amid “very challenging hotel market conditions”.

Since then, the latest national lockdown has hit demand again, Whitbread reports:

  • Improved demand for business travel, and some leisure travel, resulted in the majority of our UK hotels remaining open during the first half of December, with demand levels falling as the Government’s tier restrictions tightened in the second half of December and through into the New Year

  • Following the updated UK Government restrictions announced on 4 January 2021, that only permit essential business and keyworker accommodation, around two-thirds of our hotels remain open, while all our restaurants are closed.

CEO Alison Brittain says Whitbread has achieved “strong market share gains in the UK”, and hopes Covid-19 vaccines will help the sector recover in 2021.

We expect the current travel restrictions in the UK and Germany to remain until at the very least the end of our financial year. With the vaccination programme underway, we look forward to the potential gradual relaxation of restrictions from the Spring, business and leisure confidence returning, and our market recovering over the rest of the year.

Updated

The Card Factory in Newcastle-under-Lyme on Boxing Day .
The Card Factory in Newcastle-under-Lyme on Boxing Day . Photograph: Barrington Coombs/PA

Greetings card and party gifts group Card Factory has warned that it risks breaching its banking covenants, after being forced to shut its stores during the pandemic.

Sales for eleven months to 31 December 2020 fell to £281.4m, it reports, down from £424.5m in the last financial year.

Mandatory store closures meant Card Factories outlets were shut for 37% of available trading days, with online sales growing 137% as shoppers turned to the web instead.

Trading did pick up in October, before the November lockdown - which then disrupted Christmas trading as shoppers turned to essential stores (which kept open) instead.

Card Factory now expects to make a loss before tax of approximately £10m this financial year, adding:

Whilst our short term cash requirement can be covered within our existing £200m bank facility, we anticipate that current covenants will be breached at the end of January as the significant impact of the November and current national lockdowns are reflected in our trading performance.

We continue to have constructive discussions with our banking syndicate.

Tesco has also told reporters that it has seen some ‘limited’ supply disruption since the UK-EU trade deal began, particularly in Northern Ireland and the Republic of Ireland.

CEO Ken Murphy says:

“We have seen some limited disruption into the Republic of Ireland and into the north of Ireland, but we’re working very closely with government on both sides of the Irish Sea to smooth the flow of product.”

ITV’s Joel Hills has more details:

Primark faces £1bn sales hit from pandemic lockdown

A closed Primark store in Cardiff, Wales.
A closed Primark store in Cardiff, Wales. Photograph: Matthew Horwood/Getty Images

The latest Covid-19 lockdown is also hurting fashion chain Primark particularly badly, as it doesn’t have an online retail operation to cushion the impact of store closures.

My colleague Jasper Jolly reports:

Primark expects to lose more than £1bn in sales during the first half of its financial year because of new restrictions brought in to slow the spread of the coronavirus pandemic, forcing the closure of stores.

Shop closures and stay-at-home orders in its main UK and European markets caused a 30% fall in sales at the fast fashion retailer, to £2bn during the the 16 weeks to 2 January 2021, its owner, Associated British Foods (ABF), said.

Sales for the Christmas period in 2019 hit £2.9bn.

The retailer lost sales worth £540m during November and December, prompting it to revise up its forecast losses of £650m, made just a fortnight ago, to more than £1bn in the first half up to the end of February.

Primark has been hit particularly hard by the pandemic because its strategy focuses on bricks-and-mortar shops, with no online shopping offering. Before the pandemic the strategy helped Primark become the UK’s largest clothing retailer, focusing on low prices rather than expensive investments in online shopping.

Three-quarters of Primark’s retail space is now closed, including all of its 190 UK shops, plus another 115 across European markets such as Germany, Ireland and Spain.

And if the lockdown lasts even longer, Primark will lose even more sales, Reuters explains:

Primark owner AB Foods said that if current shop closures last until the end of March, that would result in an additional £500m pound hit to Primark’s sales, on top of the £1.05bn hit it is expecting to February 27.

“If the current number of stores remain closed until the end of March then there would be another 500 million off the sales,” said finance director John Bason in a call on Thursday.

Dunelm's Christmas sales jump, but lockdown is weighing

Home furnishings group Dunelm has also reported a jump in sales over Christmas, but warned that the latest Covid-19 lockdown is restricting business.

Total sales rose 11.8% in the 13 weeks to 26 December 2020 (the second quarter of its financial year). Dunelm’s online home delivery business more than doubled since the same period last year, as more people turned to internet shopping.

Dunelm now expects to post pre-tax profits of £112m for the first half of the financial year, up from £83.6m a year ago.

But it can’t provide ‘meaningful guidance’ for the next six months, given stores are currently closed - and it’s not sure when they’ll reopen.

Dunelm says:

During the restricted store trading period, we anticipate that Click & Collect and Home Delivery services will continue to be permitted. At this level of restricted operations, the Group will make a modest weekly loss given our fixed cost base and the decision not to claim JRS [Job Retention Scheme] support.

Our latest internal planning scenario assumes a return to more normal trading patterns in the fourth quarter of our financial year.

Halfords also points out that the current national lockdown will hurt demand for its motoring products and services.

Cycling sales may not fully offset this impact, it adds, as the market is usually ‘seasonally smaller’ (pedalling to the office is less attractive in the British winter).

As a essential retailer, Halfords stores and garages are still open. But given the uncertainty, it’s not providing profit guidance for the current quarter today. It also hasn’t decided whether to repay the business rate relief it has received this financial year.

Our position with respect to business rates relief and the Coronavirus Job Retention Scheme is still under review and we will provide an update when the COVID-19 situation becomes clearer.

Many other essential retailers have already decided to repay this money, after Tesco made the first move last month:

Halfords cycle sales boom despite port disruption

An electric scooter at a Halfords store in Rugby
An electric scooter at a Halfords store in Rugby Photograph: Molly Darlington/Reuters

Motoring and cycling group Halfords says it enjoyed its “best ever Christmas week”.

The pandemic continuing to push up demand for bikes, with Halfords reporting like-for-like sales growth of 35.4% at its cycling division during the last 13 weeks of 2020.

Adult pedal bikes, e-bikes and e-scooters were all popular, despite “despite global container shortages and port congestion impacting availability”.

But Halfords motoring arm saw sales drop 8.4% over the last quarter; a “pleasing performance” as UK traffic volumes were down around 25% due to lockdowns, it says.

Graham Stapleton, chief executive officer, says Halfords is helping keep the UK moving:

“We are pleased to have delivered a strong performance under hugely challenging circumstances, including our best ever Christmas week. Despite a large reduction in traffic on the roads, our strategically important Autocentres business saw significant growth, with particularly strong demand for the services of our growing fleet of Halfords Mobile Expert vans.

We are currently carrying out over half a million services and repair jobs on cars and bikes each month, and therefore continue to play an essential role in keeping the UK moving during this pandemic. Throughout the crisis we are privileged to have been able to offer free checks and discounts to 239,000 NHS workers, teachers and Armed Forces staff to help them keep their vehicles safe and roadworthy.

The Covid-19 lockdowns have hurt demand for Tesco’s financial products, though.

Total sales at Tesco Bank fell over a quarter over the last 19 weeks, due to weaker demand for banking and money services (such as loans and foreign currency for a holiday abroad).

Richard Hunter, Head of Markets at interactive investor, explains:

Tesco Bank has suffered from the pandemic environment, with a sales decline of 27.7% meaning that the previously guided operational loss for the year of between £175 million and £200 million remains intact.

Although unchanged, it will nonetheless punch a hole in the full-year numbers.

Tesco: What the experts say

Here’s some early reaction to Tesco’s results.

Retail analyst Nick Bubb:

Tesco has claimed “market-leading” performance for its 8.1% LFL sales growth in the UK over the 6 weeks to Jan 9th (even though that looks only par for the course): profit guidance for the year is unchanged.

John Moore, senior investment manager at Brewin Dolphin:

“Supermarkets are one of the few businesses that have managed to trade through everything that Covid-19 has thrown at the economy over the past year – it should perhaps be no surprise then that, like Sainsbury’s last week, Tesco’s has performed well.

Sales growth has been particularly strong in the UK and Ireland, offsetting the additional costs that the pandemic has brought about and an understandable slowdown at Booker, as restrictions hit end-customers.

As well as the benefits of robust trading, shareholders can also look forward to returns from the sale of the Thai and Malaysian operations later this year. Whilst Tesco Bank remains a drag and Booker may continue to see difficult market trends in the very short term, there is great momentum behind Tesco’s core platforms which offers encouragement going forward.”

Chris Daly, CEO at the Chartered Institute of Marketing:

“Tesco has followed its Big Six rivals with strong sales growth over the Christmas period. And while the short term profits from these increased sales will be held back by the costs associated with COVID-19, including establishing its online offer - doubling its delivery slots, and creating thousands of new jobs to meet increased demand - it is better placed to succeed long-term than its competition.

“Tesco has outpaced its rivals when it comes to building brand trust; it was one of the first brands to launch a campaign promoting its social-distancing measures at the start of the Covid pandemic, and pivoted quickly to refresh its popular ‘Food love stories’ towards lockdown inspired tales.

“Tesco’s marketers now have a huge opportunity to leverage their heritage status and the customer loyalty built up during the pandemic to navigate the changing landscape, and sustain a long-term relationship that holds value for customers and shareholders.”

Ross Hindle, analyst at Third Bridge:

Tesco has enjoyed a strong growth in 2020 thanks to increased consumption, savings across promotional activity and, reputational improvement.”

“Pricing has been strong through the pandemic, with the percentage of goods on discount dropping from c.40% to c.20%. Looking forward, the company is set to benefit from inflationary increases, with experts forecasting a 3-5% rise in food inflation during 2021.”

Updated

Although its supermarkets have been super busy, Tesco’s food wholesale arm, Booker, has been hit by the Covid-19 lockdowns.

Like-for-like sales at Booker fell 8.3% over the six weeks to January 9th (the Christmas trading period). Sales to caterers have been (predictably) hurt by the closure of hospitality venues.

Tesco explains:

Catering performance has been strongly correlated to the severity of UK COVID-19 restrictions including a recovery following the ‘Eat Out to Help Out’ scheme leading into the start of the third quarter.

As restrictions have tightened, the severity of the decline in the hospitality sector overall led to a fall in our catering sales of (49)% on a like-for-like basis over the Christmas period, compared to around (30)% for the third quarter. We continue to outperform the catering industry as a whole.

Tesco has also reported a jump in demand for more expensive food over Christmas.

Sales of its Finest range jumped 14%, suggesting shoppers were treating themselves after all the turmoil of 2020. Vegan and vegetarian options were also increasingly popular, it reports:

We supported customers with timely promotions including our festive 5 vegetable offer, ‘3 for 2’ party food and 25% off 6+ bottles of wine. We catered for all diets with our largest ever festive range of free-from, vegan and vegetarian products.

Sales of plant-based products increased strongly including growth of more than +90% in our Plant Chef range in the run up to Christmas. General merchandise sales grew by +4% driven by strong performance in toys, home and electrical items.

Introduction: Tesco Christmas sales jump 8.1%

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It’s a busy day for retail news, as a flurry UK firms reveal how well - or badly - they fared over the crucial Christmas period.

And the first up is Tesco, which has racked up record sales as Covid-19 lockdowns drove sales across the supermarket sector.

Britain’s biggest retailer has reported that UK like-for-like sales jumped by 8.1% over the festive period (the 6 weeks to 9 January 2021).

Online sales growth was especially strong, up 80% over the last nineteen weeks - which which equates to nearly £1 billion extra sales over that period (the third quarter of the financial year + Christmas)

Tesco says there was “unprecedented demand for online groceries”; it handled over seven million orders containing more than 400 million individual items over the Christmas period.

This follows similar strong trading results in recent days from rivals such as Sainsbury, Lidl and Morrisons, as the closure of pubs and restaurants during lockdowns led to everyone eating and drinking at home more.

Tesco also reports that large store sales also grew strongly as customers favoured larger, less frequent shopping trips (presumably to keep stocked up during the pandemic).

Ken Murphy, Tesco’s chief executive. says:

We delivered a record Christmas across all of our formats and channels. In response to unprecedented demand for online groceries, colleagues delivered over seven million orders containing more than 400 million individual items over the Christmas period.

We’re now supporting 786,000 vulnerable customers with priority access to online slots and, as lockdown measures continue, we’ll keep doing everything we can to ensure everyone can safely get the food and essentials they need.

But, Tesco has also raised its estimate for the cost of the pandemic to £810m, up from £725m back in October. It says that incremental costs, such as increased staff absences, are rising due to the “increasing severity of the pandemic”.

We’re also hearing from Primark-owner ABF, online fashion retailer BooHoo, car and cycling retailer Halfords, home furnishings group Dunelm, and musical instrument maker Gear4Music, so stay tuned...

European stock markets, meanwhile, are expected to open a little higher as investors prepare for Joe Biden to unveil his long-awaited multi-trillion dollar stimulus plan.

The agenda

  • 9am GMT: Preliminary estimate for German GDP in 2020
  • 12.30pm GMT: European Central Bank releases account of last month’s Governing Council meeting
  • 1.30pm GMT: US weekly jobless figures

Updated

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