Tesco enjoys magic Christmas after card trick

Sales of bubbly and luxury food (plus some clever marketing) help Tesco to its best Christmas in three years.

Last Updated: 06 Nov 2012

Tesco shareholders who were feeling a bit nervous after Sainsbury’s results last week will be breathing a sigh of relief this morning: the UK’s biggest retailer said that 2009 was its best Christmas for three years. Champagne, toys, electrical goods and its Finest range positively flew off the shelves, helping Tesco achieve a like-for-like sales increase of 4.9% during December and early January – pretty impressive, even if you factor in a 0.7% boost from its latest Clubcard wheeze. It looks like shoppers tired of watching the pennies fancied a bit of luxury. And after the year we’ve had, who can blame them?

The festive period was another good one for Tesco, as it continued to claw back some of the custom it lost to rivals last year. This was partly due to discounting and special offers: the supermarket slashed prices by £250m, as well as offering double Clubcard points in the run-up to Christmas to get customers through its doors. With sales up more than 8% on last year, the plan clearly worked. But customers weren’t just stocking up on cut-price mince pies: they were splashing out on luxury items too, with sales of champagne up by more than a third and its Finest food range also selling well. Very nice.

In part, Britain’s biggest supermarket chain has its new, improved loyalty card scheme to thank for this uplift in sales. Clubcard redemptions bolstered like-for-like growth by as much as 0.7%, as shoppers were enticed by the promise of double points – which is equivalent to around £34m more Clubcard vouchers being spent than in the same period last year. Although the sceptics will point out if you strip out this 0.7% (along with a further 0.1% increase due to an accounting change that made our head hurt trying to understand it) the like-for-like sales figure is actually more like 4.1% - a smidgen lower than smaller rival Sainsbury’s.
Still, we suspect Tesco boss Sir Terry Leahy won’t be too despondent. For a company of Tesco’s size to achieve nearly 5% growth is remarkable, particularly since plenty of retailers found it tough this Christmas (take Game Group, which issued a profit warning this morning). And given the success of that Clubcard promotion, he clearly has some bright sparks in his marketing department...

In today's bulletin:

Tesco enjoys magic Christmas after card trick
Kraft is trying to buy us for Buttons, Cadbury insists
Glazers milk Man United for over £20m in fees and loans
UK fraud losses jump 76% in 12 months
The Parent Project: The day I saw my future in a fridge

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