Tesco set for full non-food web launch as sales soar

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Tesco is preparing to launch its full non-food offer online after a surge in internet sales helped its underlying sales to accelerate over Christmas.

Sales at Tesco.com, which includes its non-food site Tesco Direct, jumped by more than 30 per cent to £150m during the six weeks to 6 January.

Analysts said the increase in online sales added as much as 1 per cent to the company's like-for-like sales, which topped forecasts by growing at 5.9 per cent, excluding petrol.

Andy Higginson, the finance director, said the group was "really pleased with the soft launch of Tesco Direct", which went live last autumn. It will launch a "full catalogue" and link the offer up with more of its stores from March or April, he added.

Tesco is aiming to be as big in non-food as it is in food, where it controls nearly one-third of the grocery market. The Competition Commission is days away from signalling whether it intends to crack down on Tesco's dominant market position following its probe into the industry.

Mr Higginson said he was "confident" that Tesco's pipeline of sites - one of the trigger points for the inquiry - was not under threat. In a dig at Tesco's rivals, who have all complained bitterly about its so-called "landbank", he said: "The competition authorities are not there to protect Sainsbury's, Morrison or Wal-Mart. Instead of moaning they should get out there and do a better job [on expansion]."

Tesco said it had benefited from shoppers treating themselves to its premium and organic ranges. Sales of fresh organic foods rose by 39 per cent, while its Finest-branded meat and poultry rose by more than 55 per cent. Finest is now a £1bn annual business, making it one of the UK's biggest selling brands after its underlying sales raced ahead by 16 per cent. During Christmas week, it took more than £50m .

Other highlights included selling 500,000 cashmere sweaters, 250,000 jars of Finest goose fat and 997 per cent more Finest frozen prawns. Pink tool sets were its best-selling gift and pink Christmas trees also sold well.

Just 0.1 per cent of its underlying sales growth came from inflation, helped by tumbling prices of non-food products and lower petrol prices. Group sales, excluding petrol, grew by 9.9 per cent, although international sales growth of 15.8 per cent was disappointing.

"To us this shows all the hallmarks of a business firing on all cylinders," Philip Dorgan, retail analyst at Panmure Gordon, said, pointing to the fact that volume growth accelerated from 4.6 per cent in its third quarter to 5.6 per cent. Mr Higginson warned that last week's interest rate rise meant the group was as cautious as ever.

Elsewhere, shares in Northern Food fell after it warned that rising input costs would put it under pressure in its final quarter. Like-for-like sales growth of 2.8 per cent in its third quarter was behind expectations but its margins improved.