Tesco upgrades profit outlook on stronger than expected Christmas

LONDON (Reuters) -Tesco, Britain’s biggest retailer, on Thursday raised its profit outlook for the second time in four months as it reported a rise in Christmas sales despite a tough comparative with 2020 when spending was boosted by a COVID-19 lockdown.

The group said UK like-for-like sales rose 0.2% year-on-year in its third quarter to Nov. 27 and were up 0.3% over the six weeks to Jan. 8.

As a result of stronger than expected sales to date Tesco now expects a full-year 2021-22 retail operating “slightly above” the top-end of its previous 2.5-2.6 billion pound ($3.43-$3.57 billion) range.

Tesco’s profit upgrade follows one from rival Sainsbury’s on Wednesday and bullish updates this week from the UK arms of German discounters Aldi and Lidl.

UK supermarkets faced tough comparisons against Christmas 2020 when a lockdown meant food and drink sales boomed.

While restrictions for Christmas 2021 were less severe, supermarkets still benefited from consumer nervousness over the spread of the Omicron variant which kept them away from bars and restaurants.

Tesco, which has a near 28% share of Britain’s grocery market, said third-quarter UK like-for-like sales were up 6.9% against the same period in 2019-20, before the pandemic impacted trading. Sales over the six week Christmas period were up 8.8% on the same basis.

The group said it outperformed the market and grew market share.

Tesco forecast full-year operating profit for its bank to be between 160 million pounds and 200 million pounds, due to the effect of more favourable economic forecasts on its provision for expected credit losses.

($1 = 0.7291 pounds)

(Reporting by James Davey; editing by Michael Holden and Paul Sandle)