Investing.com — Tesco ( OTC: ) delivered strong results in its third-quarter and Christmas trading update on Thursday, particularly in its core UK grocery business and sustained growth in key markets.
However, the company maintained its guidance for the full year, reflecting a cautious stance despite strong trading momentum.
“We delivered our biggest Christmas ever, with continued market share growth and switch gains,” said Ken Murphy, chief executive of Tesco.
Shares of the British retailer were down 1.6% at 03:48 ET (08:48 GMT).
Tesco’s ongoing investment in customer satisfaction, value and innovation has been key to increasing its market share and growth in parallel.
Tesco reported a strong performance in key markets, with third quarter UK sales up 3.8% and Christmas sales up 4.1%.
In the Republic of Ireland, LFL sales in the third quarter rose 4.2%, with a Christmas acceleration to 4.8%, both times ahead of forecasts.
Booker recovered from a 2.6% fall in the third quarter to 1.4% growth at Christmas, beating expectations.
Central Europe fared better, with Q3 LFL sales up 2.8% and Christmas up 4.7%, boosted by a 70bps calendar benefit in Slovakia.
Despite the strong trading results, Tesco maintained its full-year EBIT guidance of “around £2.9bn”, in line with its previous projection and close to consensus estimates of £2.96bn.
Retail free cash flow is expected to remain within a range of £1.4bn to £1.8bn, in line with the £1.69bn consensus.
Tesco reiterated that its ongoing investment in customer experience and value is driving volume momentum and positioning the company for sustainable long-term growth.
The cautious view on guidance may reflect over-prudence, according to analysts at Jefferies, especially given the strong trading results.
Jefferies views any near-term pullback as a compelling buying opportunity, marking Tesco’s potential for financial investment.
Food sales increased by 4.7%, primarily driven by volume growth, especially in the fresh food categories. Sales of non-food products, excluding toys, also increased by 4.0%, with strong contributions from the household and apparel segments.
Online sales grew by 10.8%, with market share increasing by 122 basis points. Tesco Whoosh recorded over 1.2 million orders during the festive season. In addition, Tesco’s winter food collection enabled the donation of 1.9 million meals to food banks.
In the Republic of Ireland, the performance of fresh food remained a key driver, supported by the ongoing rollout of the ‘fresh first’ refreshment programme.
Online sales in this region increased by 17.1%, following the launch of same-day Click & Collect and home delivery services. Central Europe also delivered strong results, with food sales up 3.7% and non-food sales up 1.8%.
