Christmas sales boost for Tesco

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The supermarket giant Tesco gave its rivals more food for thought today after revealing that it achieved another powerful sales performance over Christmas.

The UK's biggest supermarket chain said same-store sales excluding petrol transactions were 5.7% higher in the seven weeks to January 7, up from 5.5% in the previous three months and in line with City forecasts.

The improvement came despite better performances from Sainsbury's and Morrisons over the festive period.

Tesco said its premium Tesco Finest range sold particularly well, while it continued to benefit from non-food sales with home entertainment, electronics, clothing, toys and gifts performing strongly.

Total UK sales were 10.1% higher including the impact of new stores, and this figure rose to 11.5% once international sales were added in.

The more closely watched same-store figure was lower than the 6.7% seen at the start of 2005, but reflects the resurgence of Sainsbury's, the early signs of recovery at Morrisons and the price-cutting tactics of second-placed chain Asda.

Unlike Sainsbury's, which recently posted growth of 5.2% for Christmas, Tesco was up against testing comparatives with the same period a year earlier.

The firm said in a statement: "Tesco has delivered strong growth and record sales over the Christmas and New Year period."

Finance director Andrew Higginson said: "We are delighted that, with the fantastic performance we had last year, we have held on to those gains. To have remained the best performer of the top four is pretty pleasing."

Although consumers had been cautious in recent times, he said they had " treated themselves" over Christmas.

"From the middle of last year we've seen a more cautious customer - domestic bills have gone up, mortgages are higher," Mr Higginson said. "We've seen quite a mature response to that."

He added that once again the outlook was for a more cautious customer.

Responding to the threat posed by rivals like Asda lowering prices, he said: "It's more of the same - we've had this for years."

Tesco continued its drive to lower prices for customers, meaning prices were 1.5% lower than last year - broadly the same as during the previous quarter. However, this figure included the impact of moderating petrol prices.

Investment bank Goldman Sachs claimed in a report last week that Asda had continued to succeed in undercutting Tesco on prices and had made the deepest price cuts in the supermarket sector during January.

It claimed Asda was at least 2% cheaper than Tesco in areas such as drinks, pasta, prepared food and beauty products - although Tesco was still more competitive on cakes, cereals and fresh meat.