Festive splurge: Tesco and M&S hail strong Christmas trading but outlook cloudy
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Tesco, the UK’s biggest retailer, said it had been boosted by investment to improve value as it sought to fend off competition from discount rivals Aldi and Lidl. Chief executive Ken Murphy cheered the group’s efforts to support shoppers “dealing with tough times this Christmas” amid the ongoing cost-of-living crisis.
Tesco revealed that group like-for-like sales, excluding fuel, grew by 7.9 per cent over the six weeks to January 7, compared with the same period last year. It said this came after 5.7 per cent growth over the quarter to November 26. The group also highlighted a 7.4 per cent increase in sales volume of its low everyday prices range after launching a “price lock” commitment on these products in October.
Sophie Lund-Yates, lead equity analyst at investment platform Hargreaves Lansdown, said: “Tesco has followed in Sainsbury’s footsteps to record an exceptional set of results over the Christmas and third quarter period. The group’s dominant market share has also helped keep tills ringing, despite the growing pressure on household incomes, and the unstoppable rise of the discount supermarkets.”
Meanwhile, amid a flurry of positive updates from the retail sector, Marks & Spencer cheered strong festive trading as it revealed record food sales and its highest clothing and home market share for seven years. The retail bellwether reported a better-than-expected 6.3 per cent rise in like-for-like sales across its food halls in the 13 weeks to December 31, with its largest Christmas sales of more than £80 million on December 23 and its highest share of the market.
It saw clothing and home comparable store sales rise 8.6 per cent, giving it a market share of over 10 per cent - its highest level since 2015. M&S also stuck by its guidance for full-year results in spite of wider economic woes and fears over consumer spending amid the cost-of-living crisis.
Chief executive Stuart Machin said: “M&S sustained trading momentum through the peak quarter and both food and clothing and home have delivered strong growth. Given the inflationary pressures impacting our customers and our business, M&S is taking action to structurally reduce costs and reinforce our customer proposition.”
The group is looking to make savings of about £150m in 2023/24 to offset soaring inflation and help it weather tougher trading.
Analysts at house brokerage Shore Capital noted: “M&S is doing the right things where it has control and with better externalities brighter times should be ahead.”
Festive updates this week have pointed to a solid Christmas outcome for retailers as diverse as Lidl, JD Sports and Majestic. However, analysts have warned that the outlook remains highly challenging amid inflationary and cost-of-living pressures.
Lund-Yates added: “The major question now is how supermarket spending will hold up from here. It seems people spent big at Christmas, but this may well mean a pull back in essential spending in the short to medium term.”