Tesco expected to lag behind three big rivals

Tesco, the world's third-largest retailer, is expected to post its worst UK festive sales for a number of years on Tuesday, although many other big retail names are expected to unveil far worse figures next week.

City analysts expect the UK's biggest supermarket to post underlying sales, excluding fuel, up by 2.5 per cent for the 6 weeks to 3 January, which is likely to be substantially behind its big three rivals. On Thursday, Sainsbury's posted like-for-like sales, excluding fuel, up by 4.5 per cent – albeit for the longer trading period of 13 weeks.

Asda, which is owned by Wal-Mart, said it enjoyed one of its strongest Christmas trading seasons, but did not provide underlying sales, while Morrisons will update on 22 January.

If Tesco posts underlying sales of 2.5 cent on Tuesday, it will be its worst performance for at least four years. However, it only started posting like-for-like sales – excluding fuel – since late 2004.

City analysts cautioned that the grocer's underlying sales may be better than expected because some of its larger Tesco Extra hypermarkets were open for longer over the festive period. They also said that Tesco's launch of hundreds of discounter branded products in September may continue to dent its UK underlying sales and give it the lowest food price inflation among the big four.

Greg Lawless, the Blue Oar analyst, said: "We expect them to have underperformed [their big three rivals] because of the discount brands, but they are still in good shape. Morrisons was the real winner this Christmas."

According to Nielsen, Tesco and Sainsbury's grew their sales by 3.8 per cent, while Asda's rose by 6.7 per cent and Morrisons by 9.1 per cent for the 12 weeks to 27 December.

Next week, on what has been dubbed "Mad Thursday" for the retail sector, DSGi, Home Retail Group, HMV, Halfords and Carphone Warehouse update on Christmas trading. Among these, Credit Suisse expects DSGi's UK and Ireland electricals business, including Currys, to post underlying sales down by 15 per cent and a drop of 11 per cent at its UK computing arm, including PC World.