Tesco shares fall on weaker than expected Christmas sales growth

Tesco shares fall on weaker than expected Christmas sales growth

Britain's biggest supermarket Tesco delivered a solid performance, with United Kingdom like-for-like seasonal sales up 1.9%, driven by a strong grocery performance.

CEO Dave Lewis' strategy implementation is yielding results - 2017 saw strongest Christmas sales since former head Leahy's departure in 2010 - however the negative reaction stems from United Kingdom like-for-like sales during the key period coming in at 1.9%, well shy of 2.8% consensus, weaker than even the lowest estimate of 2.0%.

Britons, whose spending power has been squeezed by inflation, prioritised food this Christmas and cut back on almost everything else, industry data has shown.

"There is definitely some caution in the way customers are talking about the year ahead", Lewis said.

Retail bellwether Marks & Spencer blamed unusually warm weather in October for a 2.8% fall in like-for-like clothing and home sales over the 13 weeks to December 30.

Weir Group fell 2.5 percent.

Tesco's shares fell by 3.5 percent this morning despite the company stating that it had "outperformed" over the Christmas period.

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Catherine Shuttleworth, chief executive at retail marketing agency Savvy, said: "We think that the M&S food shopper has in part been lured away to the discounters this Christmas with their enhanced premium ranges and outstanding wines and spirits offers".

Lewis's strategy to rebuild Tesco following an accounting scandal in 2014 has been based on increasing food sales.

The grocery chain was further buoyed in December when its £3.7 billion takeover of wholesale group Booker was given the final all-clear by the competition watchdog.

Lewis is scaling back in general merchandise areas such as entertainment, where customers are turning to digital alternatives, while focusing on categories like clothing.

The group also reported data for the third quarter, with United Kingdom like-for-like sales up 2.3%, having increased 2.1% in the second quarter. It had passed on less inflation to date than its competitors, it claimed.

Rowe said M&S's clothing and homeware revenue grew both in-store and online over the weeks leading up to Christmas, and the retailer held its full prices when others were cutting theirs.

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