• UK like-for-like sales, excluding VAT and petrol, grew by 1.8% 
  • Total UK sales rose 4.3% excluding petrol
  • "Clothing enjoyed a stronger period"
Tesco says clothing enjoyed a stronger period over Christmas

Tesco says clothing enjoyed a stronger period over Christmas

Tesco, the UK’s largest retailer, reported an increase in underlying UK sales today (10 January), helped by "a stronger period" in clothing - and named Chris Bush as its new UK managing director.

UK like-for-like sales, excluding both VAT and petrol, grew by 1.8% in the six weeks to 5 January. Total UK sales grew by 4.2% including petrol and 4.3% excluding petrol.

Internationally, European sales declined by 0.6%, while in Asia, Tesco pointed to an improvement in like-for-like sales growth and total sales growth of 7.6%.

Group sales in the period increased by 3.8% including petrol and 3.9% excluding petrol.

Sales of general merchandise - which includes clothing and other non-food products - "was better than in the third quarter but was still a drag on our overall rate of growth, with more to be done on refocusing the business on sustainable, profitable categories in the coming year," the company said.

But it added: "Clothing enjoyed a stronger period - again, both in-store and online - on top of positive performances in the last two quarters."

Chief executive Philip Clarke noted: "The Group performed broadly in-line with our expectations through the Christmas period, with an improved performance in the UK and maintained trends elsewhere as we continue to experience tough trading conditions - particularly in Central Europe.

"Analysts, however, are yet to be convinced that Tesco is driving a sustainable turnaround.

George Scott, consultant at Conlumino, notes that while Tesco has reported its strongest rate of like-for-like growth in three years, and is beginning to show real signs of revival in its domestic market, "there's still a considerable way to go."

He adds: "Non-food as a whole continues to represent a weight around the neck of overall growth. The fundamental problem for Tesco in this area is that it continues to devote a high proportion of its overall store space to a non-food offer, which lacks inspiration.

"Moreover, in addition to more general underlying weakness in consumer demand in many of the non-food categories where it has gained strong presence, it is also contending with a relative influx of new non-food players.

"It will become increasingly important for Tesco to make fundamental improvements to its non-food offer.

And Kate Calvert at Seymour Pierce points out: "A year on from an effective profit warning, Tesco has had an unspectacular Christmas in the UK given last year's very weak comparables and material margin investment.

"There is still much to be done given general merchandise remains a drag and we believe there will be no visibility on whether UK profits have bottomed until the second half of 2013.

"With inflation coming back and too many of its international businesses also facing trading issues currently...we believe there is a high risk that things will get worse before they get better."