Tesco's Christmas sales beat expectations

Tesco, which has been wrong-footed by the seismic changes in the industry caused by the advance of discount groups Aldi and Lidl, said sales rose in the 19 weeks to January 9, the first increase in over four years.

Shares shot up six per cent in early trading. Chief executive Dave Lewis said: "There is plenty more to do, but we are making good progress and are trading in line with profit expectations for the full year."

The firm said like-for-like sales at UK stores rose 1.3 per cent in the six weeks to January 9, compared with analyst forecasts of a fall of one to three per cent.

Lower prices, 4,000 additional staff and a strong offering over Christmas meant volumes rose by 3.5 per cent and transactions by 3.4 per cent as more customers chose to shop more regularly at the supermarket.

The group, which reported one of the biggest losses in British corporate history last April and admitted manipulating its accounts, said it had also seen improvements across the board - from its largest stores and smallest, and both home and abroad.

The result, following a strong update from the second-biggest supermarket Sainsbury's and Bradford-based Morrisons, suggests the industry is finally to getting to grips with the changes in the sector.

The big four supermarkets, which include Leeds-based Asda, 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.

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.

Under Mr Lewis the firm has spent heavily to cut costs and improve 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."

Tesco also provided an update on its trading for the 13 weeks to November 28, its fiscal third quarter, where like-for-like sales in the UK fell 1.5 per cent, better than expected but a slowdown from the one per cent drop from the second quarter.

Tesco's share price hit an 18-year low last month as investors fretted over the pace of progress under Mr Lewis but they had edged up in recent days as industry data suggested it may have enjoyed a stronger Christmas period.