Tesco and M&S report strong Christmas food sales

Retail giants Tesco and Marks & Spencer both saw a bump in food sales over the vital Christmas period despite both mentioning a challenging economic backdrop.

Tesco said sales in the UK were up 3.2% from last year and it had now notched up its highest market share in more than a decade.

M&S said that it had seen a record number of customers over Christmas and its food sales were “strong”.

However, sales at its clothing, home and beauty business fell, with M&S blaming the decline on lower footfall on the High Street and lingering issues from last year’s cyber-attack.

M&S suffered a sales fall of 2.9% in its fashion, home and beauty products which it said was still suffering from stock and inventory issues following the cyber-attack.

Chief executive Stuart Machin said: “Food sales were strong and the business continues to outperform, hitting a new market share milestone in the period.

“Fashion, Home & Beauty is getting back on track as we work through the tail end of recovery,” he added.

Dan Coatsworth, head of markets at AJ Bell, said the fall in fashion sales was “going to disappoint a lot of people as the past few years suggested that M&S had finally cracked the right formula to look smart with clothing”.

He added that rival fashion chain Next – which reported strong Christmas sales earlier this week – seemed to have an “edge” that M&S lacked.

Tesco boss Ken Murphy said he was “delighted” with the supermarket’s performance over Christmas amid “intense” competition.

He highlighted the performance of the Tesco Finest range, which saw sales growth of 13%.

The supermarket is now expecting to report annual operating profits at the upper end of the £2.9bn-£3.1bn range it predicted in October.

“Tesco has seen a consistently strong performance over the last couple of years really, where it’s really focused on price,” said Sofie Willmott, associate director at GlobalData Retail.

She said that by price-matching Aldi, and offering lower prices to its Clubcard holders, Tesco had “managed to retain its number one position at the top of the market”, despite heavy discounting on some of its products to compete with rivals.

“It also saw very good performance in its Finest range where shoppers are maybe not eating out as much or treating themselves,” she added.

Despite Tesco’s latest profit guidance, “many had been hoping for a bigger upgrade”, said Aarin Chiekrie, analyst at Hargreaves Lansdown, adding that the group’s performance had been dragged down by its wholesale business, Booker, which suffered from a decline in tobacco sales.

That disappointment was reflected in Tesco’s share price, which fell nearly 5% in early trading.