Tesco has increased its profit guidance following better-than-expected Christmas sales due to exceptionally strong fresh food sale volumes.
The news came as Tesco released its Q3 and Christmas trading statement on Thursday. The period covers the 13 weeks to 25 November, while Christmas sales refer to the six weeks up to 6 January 2024.
The UK supermarket chain reported strong Christmas sales, following price cuts on almost 2,700 products. This was primarily due to exceptionally robust fresh food sales, which saw particularly strong volumes.
The company also offered promotions and guarantees such as Low Everyday Prices, Aldi Price Match and Clubcard Prices.
Christmas sales for Tesco saw a boost of 6.8% in the UK and 1.6% in Central Europe in 2023/2024. Sales for Q3 were 7.9% in the UK, but -1.4% in Central Europe.
The company also introduced their “Finest Chef’s Collection” range, as well as more than 550 new and improved festive products. This included a Christmas dinner for just £2.09 (€2.43) per person. This led to the supermarket winning 35 Christmas food awards.
Total Finest product sales grew about 16.7%, seeing a record Christmas sales week, with online sales rising about 11.5% in the run up to Christmas.
Tesco customers and colleagues also donated more than two million meals to food banks via their Winter Food collection programme.
Sales for Booker, Tesco’s wholesale grocery distribution and catering business, also increased 3.9% in Q3 and 4.1% during Christmas. Total like-for-like catering sales for the entire 19 weeks, comprising both Q3 and the Christmas period, inched up 3.5%.
The supermarket chain also launched a new distribution centre in Fareham, at a former Dutch warehouse brand Makro site, in an ongoing redevelopment effort to ensure better service for Booker retail partners.
Tesco raises profit outlook for 2023/2024 financial year
As a result of this better-than-expected performance, Tesco has now raised its profit guidance for the 2023/2024 financial year. Retail adjusted operating profit is now expected to be £2.75 billion, more than the previously revealed guidance range of between £2.6 billion and £2.7 billion. Retail cash flow generation is expected to be around £2 billion, while bank operating profit is estimated to come in at between £130 million and £160 million.
According to CEO Ken Murphy, “The Tesco team has worked harder than ever to help customers celebrate this Christmas, with our strongest ever range of great value, fantastic quality food. We stepped up our investment in service over the key festive period, with more colleagues on the shop floor, helping to deliver market-leading availability and making this our best Christmas yet.”
However, the CEO warned the UK cost of living may not yet be over, despite inflation coming down significantly in the past few months. The supermarket also expressed concerns about rising food prices because of the ongoing Red Sea crisis, with Ken Murphy outlining that it may “drive inflation on some items”.
This is largely due to the longer shipping and travel times, as most commercial and cargo ships look to take detours to avoid the conflict-ridden Red Sea region.