Tesco’s festive cheer as defectors flock back from discount rivals

Tesco claimed a return to form today after five tricky years, saying it is stealing custom from rivals and enjoying better relations with suppliers.

The supermarket giant has been attempting to recove from an ongoing accounting scandal and property writedowns that led to one of the biggest losses in UK corporate history of £6.4 billion last year.

Today it said sales were up in the third quarter and in the six weeks to January 7. Its market share edged up slightly to 28.2%, the first time that has happened since 2011 when Sir Terry Leahy stood down as chief executive.

That suggests it is finally fending off the march of the German discount kings Aldi and Lidl.

It is on track, it said, to make profit for the year of at least £1.2 billion — a long way short of the £4 billion a year it used to make under Leahy.

Present chief executive Dave Lewis said all shop formats are in growth as he reported the eighth consecutive quarter of same-store sales growth. “A significant step in the turnaround of the business,” he said.

Sales were up 1.5% in the third quarter, but just 0.3% over Christmas. He declined to say from whom Tesco is winning back custom.

“I am not focused on any particular competitor,” he said.

“We are rebuilding our business by being completely customer centric.” With inflation likely to hit 3% this year, food prices are sure to rise.

“Inflationary pressure is there,” said Lewis. “It is not something we welcome. We will deal with whatever the mitigating factors are in the economy.”

A typical basket of goods is still cheaper now than it was two years ago, he claimed. Tesco served 266 customers in the UK every second on Christmas Eve, said Lewis.

He also claimed a turnaround in strained relations with suppliers, some of whom have long complained that they are relentlessly squeezed in unfair ways.

“Some of the stories about working with suppliers have been nothing short of miraculous,” Lewis said.

The shares, which edged up last week in anticipation of strong sales, today slipped 4p to 205p.