Like-for-like UK sales rose 3.8% in the third quarter ending Nov 23, Tesco said in a statement today, with the trend continuing over the Christmas period.
Still, Tesco’s shares fell as much as 3.2% in early trading in London amid a wider market selloff.
They’re still up more than 20% in the last 12 months.
Tesco has been gaining ground on rivals in recent months, as moves to price-match against discount retailers such as Aldi and the promotion of its Clubcard loyalty programme drew in shoppers.
It has also benefited by missteps by competitors including Asda, which has struggled since its takeover by private equity firm TDR Capital and brothers Mohsin and Zuber Issa in 2021.
Tesco now holds almost 29% of the market ahead of second-ranked J Sainsbury Plc at 16%, research firm Kantar said this week.
Like-for-like sales in the UK surged 4.1% in the six weeks to Jan 4, which it contributed to the price of its traditional Christmas dinner being 12% lower compared with the previous year.
Yet the strong quarterly figures come amid warnings from the wider sector about the impact of a flagging economy weighing on consumer sentiment, as well as tax rises announced in the Labour government’s first budget.
Marks & Spencer Group Plc shares slumped in London despite reporting it broke sales records over Christmas.
The retailer warned about the impact of rising costs.
Chancellor of the Exchequer Rachel Reeves announced revenue-raising measures worth more than £40 billion to support the National Health Service and infrastructure, with higher payroll taxes the biggest component.
Higher national insurance contributions, a payroll levy, will add about £250 million in costs per year, Tesco CEO Ken Murphy said on an earnings call.
“There’s no doubt the budget has impacted the cost of doing business in the UK,” he said.
What Bloomberg Intelligence says:
“Tesco’s reiterated fiscal-2025 retail-profit guidance of £2.9 billion may disappoint – after a 4.1% same-store-sales increase in core UK supermarkets over the six-week Christmas period – as consensus (with a £120-million Bank contribution) already exceeds this by 2%.
“Rising labour costs, exacerbated by the UK payroll-tax increase, will be one element challenging the fiscal-2026 margin, potentially forcing some above input-cost-price rises”.
As the UK’s biggest private-sector employer, Tesco is expected to face the largest bill from the payroll tax increase, though it has said it will offset as much of the budget’s impact as it can through cost savings and automation.