Brand guarantee pledge helped to put grocer in front of race

Britain’s biggest retailer said UK like-for-like sales rose 1.3 per cent in the six weeks to January 9, much better than analysts’ forecasts of a fall of between one and three per cent.

Bradford-based Morrisons reported a 0.5 per cent increase over the six weeks to January 3 while Sainsbury’s said like-for-like sales fell 0.4 per cent in the 15 weeks to January 9, although this was for a much longer period than the all important six festive weeks.

Leeds-based Asda won’t report until next month, but industry figures predict it will be the worst performer out of the big four, prompting it to invest a further £500m in price cuts,

Tesco said it was boosted by price reductions, 4,000 additional staff and a strong offering over Christmas, which led to a 3.4 per cent increase in transactions as more customers switched back to the market leader.

The figures suggest Tesco may finally be recovering from several years of turmoil, a recovery led by respected chief executive Dave Lewis.

“Our Christmas performance was strong,” said Mr Lewis.

“There is plenty more to do, but we are making progress and are trading in line with profit expectations for the full year.”

The group, which reported one of the biggest losses in British corporate history last April and admitted manipulating its accounts, said it had seen improvements across the board from large stores to small shops and at home and abroad.

The big four supermarkets have been hit by a shift away from big weekly food shopping trips towards more frequent spending, either at convenience stores, online or at discounters Aldi and Lidl.

For Tesco these changes came at a time when it was distracted by an ill-fated expansion abroad, meaning it took too long to react to the changes on its home turf.

Under Mr Lewis the firm has cut costs and improved the look of its stores.

Analysts welcomed the news, but said the group needs to now show it can translate the stronger trading into improved profitability.

“Tesco’s Christmas numbers have shown there is light at the end of the tunnel,” said John Ibbotson, director of the retail consultancy Retail Vision.

“The challenge is to keep up the momentum and stay in the game.

“In this regard, Tesco will be thankful of its size, which means it can keep its prices down for longer than anyone else.”

Analysts at Bernstein said: “Sales turning positive over Christmas is a great result for Tesco and, combined with the strong performance in its international business, suggests that the company is well on the way to recovery.”

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, added: “With its competitors already having provided some pleasant surprises, Tesco has completed the supermarket sweep with an update which has highlighted a particularly strong Christmas trading period.”

Tesco also provided an update on its trading for the 13 weeks to November 28, its fiscal third quarter, showing that like-for-like sales in the UK fell 1.5 per cent.

This was better than expected but a slowdown from the one per cent drop from the second quarter.

The UK performance was hit after Tesco scrapped its “£5 off £40” promotion which it held in 2014.

Under the revival led by Mr Lewis, Tesco has shut more than 50 unprofitable stores since the start of its financial year and shelved plans to open a further 49.TESCO EMERGED as the festive winner among the big four grocers after strong Christmas trading led to the first increase in underlying sales in over four years.