Tesco, the UK’s biggest supermarket, and Marks & Spencer were both Christmas winners with stronger than expected sales helped by growth in online orders and high demand for festive treats.
The supermarket upgraded its profits expectations for the year by £50m to £2.75bn as it reported “a stronger trading performance than anticipated” over the festive period.
Sales rose by 6.8% at the group’s UK supermarkets in the four weeks to Christmas, helping the whole group – which includes the wholesale business Booker and supermarkets in central Europe and Ireland – lift sales by 6%.
Ken Murphy, the chief executive of Tesco, said: “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.”
He said sales of the group’s premium own-label Finest range had increased by nearly 17% but it had also drawn in shoppers with thousands of price cuts and special discounts for loyalty card holders.
Online sales rose by 11.5%, bouncing back from the more difficult period for the online trade, which took a hit as their huge popularity during the pandemic lockdowns dampened.
Murphy said food price inflation was now running at about 3% to 4% but he echoed comments by Sainsbury’s boss, Simon Roberts, earlier this week, saying he did not expect deflation this year as wages continued to rise.
He said manufacturers were offering more promotions on their goods, rather than permanent price cuts, in order to win back market share from supermarkets’ own-label products which shoppers have been switching to in order to save money during the cost of living crisis.
Shoppers have begun putting more grocery items in their baskets as wage inflation has caught up with price rises, but he added: “We are still in an inflationary period.”
Marks & Spencer said food sales in established stores rose by almost 10% in the 13 weeks to 30 December as more shoppers opted to do their full weekly shop with the chain after it cut prices on basics. Sales of the group’s Remarksable value range were up by 18% with strong growth in meat, poultry, produce, grocery and in-store bakery.
M&S took its highest market share on fashion in a decade as clothing and homewares sales at established stores increased by 4.8%. M&S said it had discounted fewer items than a year before despite a mild autumn that led to heavy promotions across the market.
“We held our nerve in early November,” said Stuart Machin, the chief executive of M&S, adding that the tactic paid off as full price sales had come through later in the season.
Womenswear sales were particularly strong as the company improved its style credentials and won over shoppers with velvet suits and sequins. Knitwear, party outfits, and the brand’s premium Autograph line performed well with sales up by more than 10%. Online M&S clothing and homewares sales rose by 10.9%, the company said with many shoppers opting to pick up their orders from stores.
Machin said: “Our strategy to reshape M&S for growth has enabled sustained sales momentum across food and clothing and home over the Christmas period. We enter 2024 with a spring in our step, but clear eyed on the near-term challenges.”
He said the company had “good momentum” in new year trading but its shoppers were still “slightly cautious about what the next 12 months will bring” amid uncertainty about elections in the UK. M&S does not expect to put up prices this year as inflationary pressures had eased.
However, Machin said M&S may have to absorb some increased costs, and availability of some items – mainly clothing – may be affected in February and March as a result of attacks on container ships in the Red Sea that were forcing shipping companies to reroute to avoid the area and delaying deliveries. He said alcohol deliveries could also be affected to some extent.
Tesco also said that the problems in the Red Sea might lead to more inflation as extended shipping times would diminish capacity in the system and drive up prices if the attacks continued for some time.
Murphy said Tesco and food retailers were less affected by the delays and the company was working on alternative sources of supply for those items affected.
