Tesco hails record Christmas fuelled by online grocery surge

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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.

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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.

“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,” Murphy said. “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, where about a tenth of the food consumed in the UK is transported.

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“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.

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“I want to reassure the public that we are coping with this and availability in Northern Ireland, the Republic and mainland UK remains very strong. We see this as a challenge that needs to be overcome and resolved … but we don’t see it as a crisis.”

Last week Marks & Spencer complained about new “rules of origin” regulations, which dictate whether tariffs must be paid based on where a product’s ingredients come from and where it has been manufactured. However, Tesco said the issue was minimal for its business.

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With more shoppers turning to the web to buy groceries, the retailer said online sales had increased by more than 80% over the 19 weeks. That equates to nearly £1bn in extra sales. The retailer also highlighted that sales in its largest stores also grew strongly as customers favoured larger, less frequent shopping trips.

Sales of its Finest range were up 14% over Christmas while demand for plant-based products also increased strongly, with sales of its Plant Chef range up more than 90%. General merchandise sales were also up 4% driven by a strong performance in toys, home and electrical items.

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Tesco, which is the UK’s largest private sector employer, said about 10%, or 30,000, of its staff were off or shielding as a result of coronavirus, three-fifths the number in the initial months of the pandemic. The retailer is introducing rapid testing in its distribution centres and Murphy urged the government to prioritise vaccinating food industry workers after the vulnerable groups had been done.

The company said extra costs linked to the pandemic would be £810m in the current financial year, up almost £100m from a previous estimate. Its annual profits forecast remained unchanged despite the strong Christmas performance. Sales at its wholesale arm Booker, which Tesco bought for £3.7bn in 2017, have been dented by the closure of hospitality businesses.

Clive Black, an analyst at Shore Capital, said Tesco had done well but had not “shot the lights out”. The sales growth was, he said, “a little behind our expectations. Whereas Sainsbury’s has been boosted by Argos, Tesco has witnessed greater headwinds than we anticipated from Booker in the UK, where lockdowns have been weighing heavily upon the catering side of the business.”

Tesco’s shares closed at 241.4p, remaining flat compared to the previous day’s traiding.