Tesco toasts best festive sales for three years in UK

Grocer catches up with rivals after investment in Clubcard loyalty programme

Tesco silenced critics of its recent sluggish UK sales growth by delivering the best Christmas trading for three years, driven in part by consumers shrugging off the economic downturn to treat themselves to its premium lines.

The world's fourth largest retailer said the strong UK festive sales vindicated a huge investment in its Clubcard loyalty programme last year, notably the doubling of reward points and bringing forward a mail-out of vouchers to November from February 2010.

Lucy Neville-Rolfe, Tesco's corporate and legal affairs director, said: "We have had good results which followed a bigger strategic investment in loyalty, including doubling Clubcard, and that does seem to have got people coming through the doors and buying from us."

Group sales at Tesco, which operates in 14 countries, including South Korea, China, the US, Poland and Hungary, rose by 7.5 per cent at constant exchange rates for the six weeks to 9 January 2010, the supermarket said yesterday.

For most of 2009, Tesco's UK sales growth trailed its big three rivals, Asda, Sainsbury's and Morrisons, but their growth has now largely converged.

Tesco posted UK like-for-like sales, excluding petrol and VAT, up by 4.9 per cent for the six weeks. The supermarket, which has 2,282 UK stores, said this growth was purely down to sales volumes, implying that food price inflation was flat. Its UK sales smashed consensus City forecasts of around 3 per cent.

Tesco revealed that customers redeemed £34m more Clubcard vouchers over the period, which contributed about 0.7 per cent to its UK underlying sales. This means Tesco's performance was bang in line with Sainsbury's, which last week delivered underlying sales, excluding petrol and VAT, and any contribution from the grocer's Nectar Loyalty card scheme, up by 4.2 per cent for the 13 weeks to 2 January.

Jonathan Pritchard, an analyst at Oriel Securities, said: "Tesco's trading statement incorporates an extra week – gravely disrupted by the weather, which according to management has taken 0.5 per cent off the headline number – and it is clear that the industry leader is more than 'back in the pack' in terms of like-for-like sales growth."

Tesco hailed a 16 per cent jump in sales of its Finest premium range and said that one in four shopping baskets over the period contained such a product. Across its ranges, the grocer's sales of champagne soared by 35 per cent, as customers treated themselves over the festive period.

The supermarket, which has been one of the big winners from the disappearance of Woolworths, also boasted "good growth" on clothing, electricals and toys. On the outlook for the UK retail sector, Ms Neville-Rolfe said: "We see a slow and steady recovery."

Overseas, Tesco – which is forecast to grow pre-tax profits to £3.2bn in 2009/10 – posted total international sales up by 4.1 per cent over the six weeks. Its overall growth was held back by flat sales in Europe, as Tesco battled a recessionary and deflationary environment in Central Europe. But sales in Asia jumped by 7.8 per cent and Ms Neville-Rolfe said it was "seeing the green shoots of recovery" in the region.