Investing.com – Tesco (OTC: ) on Thursday delivered strong results in its Q3 and Christmas trading update, particularly in its core UK grocery business and steady growth in all key markets.
However, the company has maintained its full-year guidance, reflecting a cautious stance despite strong trading.
“We delivered our biggest ever Christmas, with continued dividend growth and a turnaround in profits,” said Ken Murphy, chief executive at Tesco.
Shares of the British retailer were down 1.6% at 03:48 ET (08:48 GMT).
Tesco's continuous investment in customer satisfaction, value, and innovation has helped drive its market share and like-for-like growth.
Tesco reported strong performance in key markets, with UK Q3 like-for-like sales up 3.8% and Christmas sales up 4.1%.
In the Republic of Ireland, Q3 LFL sales grew by 4.2%, and Christmas accelerated to 4.8%, both ahead of forecasts.
Booker rebounded from a 2.6% Q3 decline to 1.4% growth by Christmas, beating expectations.
Central Europe won, with Q3 LFL sales up 2.8% and Christmas growing at 4.7%, boosted by a 70-point calendar gain in Slovakia.
Despite the strong trading results, Tesco maintained its full-year EBIT guidance of “around $2.9 billion,” in line with its previous estimate and close to the consensus estimate of $2.96 billion.
Free cash flow is expected to remain within a range of £1.4 billion to £1.8 billion, in line with the consensus of £1.69 billion.
Tesco also said its continued investment in customer experience and value is driving volume and positioning the company for long-term sustainable growth.
A cautious stance on guidance may prove too prudent, say Jefferies analysts, especially given strong trading results.
Jefferies sees any short-term pullback as a compelling buying opportunity, heralding Tesco's ability to consolidate cash.
Food sales grew by 4.7%, driven primarily by volume growth, particularly in fresh food categories. Non-food sales, excluding toys, also rose 4.0%, with strong contributions from the home and clothing sectors.
Online sales increased by 10.8%, and market share increased by 122 basis points. Tesco Whoosh recorded more than 1.2 million orders over the festive period. In addition, Tesco's Winter Food Collection facilitated the donation of 1.9 million meals to food banks.
In the Republic of Ireland, the performance of fresh food remained a key driver, supported by the continuous introduction of the 'first' recycling system.
Online sales in the region grew by 17.1%, following the launch of same-day Click & Collect and home delivery services. Central Europe also delivered strong results, with food sales up 3.7% and non-food sales up 1.8%.