Investing.com – Tesco (OTC:) on Thursday delivered strong results in its third-quarter and Christmas trading update, particularly in its core UK grocery business and sustained growth in key markets.
However, the company maintained its full-year guidance, reflecting a cautious stance despite strong trading momentum.
“We delivered our biggest Christmas ever, with market share continuing to grow and turnover gains,” Tesco CEO Ken Murphy said.
Shares of the British retailer fell 1.6% at 03:48 ET (08:48 GMT).
Tesco's continued investments in customer satisfaction, value and innovation have been instrumental in enhancing its market share and like-for-like growth.
Tesco reported a strong performance in key markets, with UK like-for-like sales in the third quarter up 3.8% and Christmas sales up 4.1%.
In the Republic of Ireland, third-quarter AFL sales rose 4.2%, with the Christmas rate accelerating to 4.8%, both beating expectations.
Booker rebounded from a 2.6% decline in the third quarter to 1.4% growth at Christmas, beating expectations.
Central Europe outperformed, with third-quarter Football League sales up 2.8% and Christmas sales up 4.7%, supported by a 70 basis point calendar advantage in Slovakia.
Despite the strong trading results, Tesco maintained full-year EBIT guidance of “about £2.9bn”, in line with its previous forecast and close to the consensus estimate of £2.96bn.
Retail free cash flow is expected to remain within the range of £1.4bn to £1.8bn, in line with the consensus of £1.69bn.
Tesco reiterated that its continued investments in customer experience and value are driving volume momentum and positioning the company for long-term sustainable growth.
A cautious stance on guidance may reflect an abundance of wisdom, according to analysts at Jefferies, especially in light of strong trading results.
Jefferies views any short-term pullback as a compelling buying opportunity, signaling Tesco's potential for financial worsening.
Food sales increased 4.7%, driven primarily by volume growth, particularly in fresh food categories. Non-food sales, excluding toys, rose 4.0%, with strong contributions from the home and apparel sectors.
Online sales rose 10.8%, with market share increasing by 122 basis points. Tesco Whoosh recorded more than 1.2 million orders over the festive season. In addition, Tesco's Winter Food Collection has facilitated the donation of 1.9 million meals to food banks.
In the Republic of Ireland, fresh food performance remained a key driver, supported by the ongoing rollout of the “Fresh First” modernization programme.
Online sales in this region rose by 17.1%, following the launch of Click & Collect and same-day home delivery services. Central Europe also achieved strong results, with food sales up 3.7% and non-food sales up 1.8%.
