Tesco shares retreat despite strong festive trading update
By Benjamin Chiou
Date: Thursday 09 Jan 2025
(Sharecast News) - Shares in Tesco fell on Thursday despite the grocery giant reporting a solid uptick in sales growth over the key Christmas trading period, with the stock retreating after a solid rally over the past six months.
Tesco's sales across the UK and Republic of Ireland increased by 3.7% over the six weeks to 4 January, up from 2.8% growth over the third quarter ended 23 November, helped by growth at wholesale division Booker turning positive over Christmas.
Operations in Central Europe also saw an acceleration of growth to 4.7% over the festive period, up from 2.8% in the third quarter.
As a result, overall group sales growth picked up to 3.8% from 2.8%, with total revenues over the two periods combined (19 weeks to 4 January) up 3.3% on last year at £23.9bn.
Looking ahead, Tesco said that it continues to forecast a retail adjusted operating profit for the full year of £2.9bn, in line with upgraded guidance reported at its interim results in October.
"We invested to bring the best value, quality and service to everyone, no matter how or where they shopped with us. As a result, we delivered our biggest ever Christmas, with continued market share growth and switching gains," said chief executive Ken Murphy
Market share in the UK over the 12 weeks to 28 December increased by 78 basis points to 28.5%, its highest since 2016, driven by 19 consecutive periods of share gains.
"Our strong performance reflects the investments we have made, positioning Tesco as the UK's cheapest full-line grocer for over two years, improving quality across all our ranges, with more than half of this year's Christmas range new or improved, and providing the best experience for our customers in-store and online, supported by an extra 28,000 colleagues over the Christmas period."
Despite the solid trading update, the stock was down 1.5% at 364.5p by 0859 GMT, pulling back after a 20% jump in the shares since early July.
Richard Hunter, head of markets at Interactive Investor, said that the cool reaction could simply be a result of profit-taking following a more-than-80% surge in the shares since late-2022.
"Regardless of the fact that investors have given a cool reception to the update, the longstanding market consensus of the shares as a strong buy and the preferred play in the sector is unlikely to waver," he said.
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