Tesco posts record Christmas sales, but Covid-19 costs rise – business live

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Halfords also points out that the current national lockdown will hurt demand for its motoring products and services.

Cycling sales may not fully offset this impact, it adds, as the market is usually ‘seasonally smaller’ (pedalling to the office is less attractive in the British winter).

As a essential retailer, Halfords stores and garages are still open.

But given the uncertainty, it’s not providing profit guidance for the current quarter today.

It also hasn’t decided whether to repay the business rate relief it has received this financial year.

Our position with respect to business rates relief and the Coronavirus Job Retention Scheme is still under review and we will provide an update when the COVID-19 situation becomes clearer.

Many other essential retailers have already decided to repay this money, after Tesco made the first move last month:

Motoring and cycling group Halfords says it enjoyed its “best ever Christmas week”.

The pandemic continuing to push up demand for bikes, with Halfords reporting like-for-like sales growth of 35.4% at its cycling division during the last 13 weeks of 2020.

Adult pedal bikes, e-bikes and e-scooters were all popular, despite “despite global container shortages and port congestion impacting availability”.

But Halfords motoring arm saw sales drop 8.4% over the last quarter; a “pleasing performance” as UK traffic volumes were down around 25% due to lockdowns, it says.

Graham Stapleton, chief executive officer, says Halfords is helping keep the UK moving:

“We are pleased to have delivered a strong performance under hugely challenging circumstances, including our best ever Christmas week.

Despite a large reduction in traffic on the roads, our strategically important Autocentres business saw significant growth, with particularly strong demand for the services of our growing fleet of Halfords Mobile Expert vans.

We are currently carrying out over half a million services and repair jobs on cars and bikes each month, and therefore continue to play an essential role in keeping the UK moving during this pandemic. Throughout the crisis we are privileged to have been able to offer free checks and discounts to 239,000 NHS workers, teachers and Armed Forces staff to help them keep their vehicles safe and roadworthy.

The Covid-19 lockdowns have hurt demand for Tesco’s financial products, though.

Total sales at Tesco Bank fell over a quarter over the last 19 weeks, due to weaker demand for banking and money services (such as loans and foreign currency for a holiday abroad).

Richard Hunter, Head of Markets at interactive investor, explains:

Tesco Bank has suffered from the pandemic environment, with a sales decline of 27.7% meaning that the previously guided operational loss for the year of between £175 million and £200 million remains intact.

Although unchanged, it will nonetheless punch a hole in the full-year numbers.

Here’s some early reaction to Tesco’s results.

Retail analyst Nick Bubb:

Tesco has claimed “market-leading” performance for its 8.1% LFL sales growth in the UK over the 6 weeks to Jan 9th (even though that looks only par for the course): profit guidance for the year is unchanged.

John Moore, senior investment manager at Brewin Dolphin:

“Supermarkets are one of the few businesses that have managed to trade through everything that Covid-19 has thrown at the economy over the past year – it should perhaps be no surprise then that, like Sainsbury’s last week, Tesco’s has performed well.

Sales growth has been particularly strong in the UK and Ireland, offsetting the additional costs that the pandemic has brought about and an understandable slowdown at Booker, as restrictions hit end-customers.

As well as the benefits of robust trading, shareholders can also look forward to returns from the sale of the Thai and Malaysian operations later this year. Whilst Tesco Bank remains a drag and Booker may continue to see difficult market trends in the very short term, there is great momentum behind Tesco’s core platforms which offers encouragement going forward.”

Chris Daly, CEO at the Chartered Institute of Marketing:

“Tesco has followed its Big Six rivals with strong sales growth over the Christmas period.

And while the short term profits from these increased sales will be held back by the costs associated with COVID-19, including establishing its online offer – doubling its delivery slots, and creating thousands of new jobs to meet increased demand – it is better placed to succeed long-term than its competition.

“Tesco has outpaced its rivals when it comes to building brand trust; it was one of the first brands to launch a campaign promoting its social-distancing measures at the start of the Covid pandemic, and pivoted quickly to refresh its popular ‘Food love stories’ towards lockdown inspired tales.

“Tesco’s marketers now have a huge opportunity to leverage their heritage status and the customer loyalty built up during the pandemic to navigate the changing landscape, and sustain a long-term relationship that holds value for customers and shareholders.”

Ross Hindle, analyst at Third Bridge:

Tesco has enjoyed a strong growth in 2020 thanks to increased consumption, savings across promotional activity and, reputational improvement.”
“Pricing has been strong through the pandemic, with the percentage of goods on discount dropping from c.40% to c.20%.

Looking forward, the company is set to benefit from inflationary increases, with experts forecasting a 3-5% rise in food inflation during 2021.”

Although its supermarkets have been super busy, Tesco’s food wholesale arm, Booker, has been hit by the Covid-19 lockdowns.

Like-for-like sales at Booker fell 8.3% over the six weeks to January 9th (the Christmas trading period).

Sales to caterers have been (predictably) hurt by the closure of hospitality venues.

Tesco explains:

Catering performance has been strongly correlated to the severity of UK COVID-19 restrictions including a recovery following the ‘Eat Out to Help Out’ scheme leading into the start of the third quarter.

As restrictions have tightened, the severity of the decline in the hospitality sector overall led to a fall in our catering sales of (49)% on a like-for-like basis over the Christmas period, compared to around (30)% for the third quarter. We continue to outperform the catering industry as a whole.

Tesco has also reported a jump in demand for more expensive food over Christmas.

Sales of its Finest range jumped 14%, suggesting shoppers were treating themselves after all the turmoil of 2020. Vegan and vegetarian options were also increasingly popular, it reports:

We supported customers with timely promotions including our festive 5 vegetable offer, ‘3 for 2’ party food and 25% off 6+ bottles of wine. We catered for all diets with our largest ever festive range of free-from, vegan and vegetarian products.

Sales of plant-based products increased strongly including growth of more than +90% in our Plant Chef range in the run up to Christmas. General merchandise sales grew by +4% driven by strong performance in toys, home and electrical items.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It’s a busy day for retail news, as a flurry UK firms reveal how well – or badly – they fared over the crucial Christmas period.

And the first up is Tesco, which has racked up record sales as Covid-19 lockdowns drove sales across the supermarket sector.

Britain’s biggest retailer has reported that UK like-for-like sales jumped by 8.1% over the festive period (the 6 weeks to 9 January 2021).

Online sales growth was especially strong, up 80% over the last nineteen weeks – which which equates to nearly £1 billion extra sales over that period (the third quarter of the financial year + Christmas)
Tesco says there was “unprecedented demand for online groceries”; it handled over seven million orders containing more than 400 million individual items over the Christmas period.

Ashley Armstrong
(@AArmstrong_says)
Tesco delivered seven million groceries in the 6 weeks before Christmas equivalent to an extra £1bn of online sales. UK like-for-likes over 6 wk period to 9 January rose by 8.1 per cent while they were up by 6.7 per cent in the preceding third quarter

January 14, 2021

This follows similar strong trading results in recent days from rivals such as Sainsbury, Lidl and Morrisons, as the closure of pubs and restaurants during lockdowns led to everyone eating and drinking at home more.

Tesco also reports that large store sales also grew strongly as customers favoured larger, less frequent shopping trips (presumably to keep stocked up during the pandemic).

Ken Murphy, Tesco’s chief executive. says:

We delivered a record Christmas across all of our formats and channels.

In response to unprecedented demand for online groceries, colleagues delivered over seven million orders containing more than 400 million individual items over the Christmas period.

We’re now supporting 786,000 vulnerable customers with priority access to online slots and, as lockdown measures continue, we’ll keep doing everything we can to ensure everyone can safely get the food and essentials they need.

Chris Bailey
(@Financial_Orbit)
UK stocks today #1 – Tesco – are growing no surprise. ‘We’re in great shape to keep delivering in 2021 and beyond.” pic.twitter.com/J1KJDcOzB0

January 14, 2021

Steve Dresser
(@dresserman)
Very solid figures from Tesco. Notable is their price perception improvement, campaign vs Aldi too.

Is that the reason Aldi are flagging on Kantar v Lidl e.g.

January 14, 2021

But, Tesco has also raised its estimate for the cost of the pandemic to £810m, up from £725m back in October.

It says that incremental costs, such as increased staff absences, are rising due to the “increasing severity of the pandemic”.

Steve Dresser
(@dresserman)
Covid impact for Tesco now £810m due to 3rd lockdown.

January 14, 2021

We’re also hearing from Primark-owner ABF, online fashion retailer BooHoo, car and cycling retailer Halfords, home furnishings group Dunelm, and musical instrument maker Gear4Music, so stay tuned…

European stock markets, meanwhile, are expected to open a little higher as investors prepare for Joe Biden to unveil his long-awaited multi-trillion dollar stimulus plan.

IGSquawk
(@IGSquawk)
European Opening Calls:#FTSE 6767 +0.32%#DAX 14000 +0.43%#CAC 5685 +0.39%#AEX 647 +0.34%#MIB 22606 -0.61%#IBEX 8393 +0.39%#OMX 1968 +0.27%#STOXX 3629 +0.35%#IGOpeningCall

January 14, 2021

The agenda
9am GMT: Preliminary estimate for German GDP in 2020
12.30pm GMT: European Central Bank releases account of last month’s Governing Council meeting
1.30pm GMT: US weekly jobless figures

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