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Tesco on a slower supermarket sweep, gathering market share and raising profit outlook

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Tesco on a slower supermarket sweep, gathering market share and raising profit outlook

Sussanah Streeter

Share Research – 13 January 2022

Tesco on a slower supermarket sweep, gathering market share and raising profit outlook

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

‘’Tesco was on a slower supermarket sweep in the run up to Christmas this year, but gathered further market share as its giant trolley of operations scooped up customers searching for value. The grocer improved on last year’s bumper festive performance, when locked down shoppers had little option to entertain at home. Like-for-like sales eked out another 0.3% growth, taken against the same period last year. Compared to 2019 Tesco is on a roll, with like-for-like sales up 8.8% over the Christmas period and up 6.9% for the third quarter. It’s behind the trajectory of Marks and Spencer which came later to the online grocery party, and has seen food sales rocket by 12.4%, boosted by its partnership with Ocado.

But this latest notching up in sales growth for Tesco, given its sheer size, is set to translate into another significant slice of profits. Its guidance is now for full year profit to come in slightly above the top-end of its previous £2.5-2.6 billion range. This is yet more evidence that grocers are careering ahead with sales growth compared to pre-pandemic levels. With stores kept open throughout the crisis, due to their essential retailer status, shoppers have become used to visiting the grocers for a one stop shop for their needs and that trend is sticking around for longer than first thought.

The spread of Omicron does appear to have boosted the fortunes of the grocers even further. The spread of the new variant, the fear of infection and the mass cancellation of Christmas parties drove consumers yet again back to the home for their social lives. So a bumper December of this level for the grocers may be hard to replicate, which may partly account for the share slide of grocers in early trading. There is also much uncertainty ahead about shopper’s habits, given the income squeeze, and it’s unlikely baskets will continued to be piled high with expensive treats, making the battle over value that bit more competitive.’’

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