Tesco and M&S report strong Christmas sales

Strong demand for festive treats has led both Tesco and Marks & Spencer to report higher-than-expected sales over the key Christmas trading season.

Tesco also raised its profit forecast for the full year, with sales boosted by strong demand for fresh goods and its premium Finest range.

M&S reported robust demand over the festive period, with both its food and clothing businesses doing well.

However, M&S warned of an uncertain outlook for the coming year.

While inflation - the rate at which prices are rising - has been falling in recent months, the past year has still seen big rises in food prices. This has pushed up the value of sales at all supermarkets.

M&S saw sales rise 8.1% over the 13 weeks to 30 December. Food sales were up 9.9% and its clothing and home section saw a 4.8% increase.

It said womenswear was the "standout" performer in non-food sales and boss Stuart Machin said he did not expect to increase clothing prices this year.

However, the High Street giant said the economic outlook for 2024 was uncertain, "with consumer and geopolitical risks".

"We also face additional cost increases from higher than anticipated wage and business rates related to cost inflation," it added.

Earlier this week, the British Retail Consortium warned that shoppers and retailers are set for a "challenging" year ahead, with higher living costs continuing to squeeze household budgets.

M&S said the disruption to shipping in the Red Sea meant it was expecting some "slight delay" to deliveries of clothing and home goods in February and March.

The retailer also said more than 9,200 of its workers - the majority being customer service assistants - would get a payout from a share scheme.

M&S said those employees who had put a typical £150 a month into its 2020 share save scheme would gain more than £10,000 when the scheme pays out in February.

Despite the stronger-than-expected sales figures, shares in M&S fell more than 5% in early trade.

"Chief executive Stuart Machin has echoed previous statements that more work is needed to transform the business," said Russ Mould, investment director at AJ Bell.

"The latest update would suggest the company's turnaround programme remains on track but it is understandable that the boss wants to manage expectations and not let anyone assume it's going to be an easy ride from now on."

Tesco said UK sales rose 6.8% over the six weeks to 6 January, and that it had also seen sales volumes growing.

Its premium food products did well, with sales of its Finest range up by nearly 17% over the Christmas period.

At the same time, Tesco said it had cut prices on nearly 2,700 products as it sought to head off competition from discount rivals such as Aldi and Lidl.

The supermarket now expects its retail operating profits to hit £2.75bn for the full year, above its previous guidance range of £2.6bn to £2.7bn.

Tesco chief executive Ken Murphy said he was "cautiously optimistic" about consumer spending, given mortgage rates are beginning to fall and wages are growing.

"So as long as we are in a full employment market I feel like we're in a period of relative stability," he said.

On Tuesday, rival Sainsbury's reported an 8.6% increase in grocery sales over the six weeks to 6 January, helped by demand for festive food.

However, this increase was offset by falling sales of clothing and at its Argos business.