Christmas and 3Q19 Trading Update Tesco, the U.K.’s biggest grocery retailer, reported results for 3Q19 (ended November 24, 2018), and the subsequent six-week Christmas period (ended January 5). For the core six-week Christmas period, Tesco grew comparable sales in its U.K. operations by 2.2%, above the consensus estimate of 1.4% from StreetAccount. The company said it outperformed the market in volume and value terms and versus the market “in all key categories: food, clothing and general merchandise.” In central Europe, comparable sales were down 2.4%; in Asia, comps fell 2.8%.; in Ireland, comps were up 0.3%. For 3Q19:

• Tesco grew comparable sales in its core U.K. operations 0.7%, below the consensus estimate of 1.0% recorded byStreetAccount, and below the 2.5% growth reported in the previous quarter.
• Tesco’s U.K. comp figure was lower than 3.6% growth in comparable sales reported by rival Morrisons on Tuesday, but above the 1.1% comp decline reported by Sainsbury’s on Wednesday.
• Tesco said it completed 95% of the roll-out of its “Exclusively at Tesco” discount ranges by the end of the quarter, with 82% of customers buying products from this range.
• Booker posted strong growth: comparable sales excluding tobacco were up 10.7%.
• For central Europe, comparable sales were down 3.0% in the quarter, compared to a 2.0% decline reported the previous quarter.
• Asia showed the worst performance as same-store sales declined 8.0%, compared to a 4.8% decline in the previous quarter.
• For Ireland, comparable sales were down 0.2%, compared to 3.1% growth posted in the the previous quarter.

Management Commentary CEO Dave Lewis attributed the slowdown in U.K. sales in 3Q19 to “self-imposed” factors such as its own-label relaunch, which prompted changes in the sales mix, going on to characterize it as “the strongest Christmas we've had for nearly a decade.” In a company statement, management highlighted the increase in U.K. comparable sales represented the twelfth consecutive quarter of underlying growth, reflecting improvements to its offerings in a challenging market. More than 74% of its 10,000 own-brand products were relaunched by the end of the third quarter. The roll out of “Exclusively at Tesco” brands helped Tesco to “outperform the market” on U.K. sales volumes by the end of the quarter. The company noted that, in general merchandise, demand for Fox & Ivy housewares and Go Cook cookware ranges contributed to overall comparable sales growth of 7.7% in these categories during the 19-week period (3Q19 + Christmas). This partially offset an overall decline in general merchandise sales which impacted overall U.K. comparable sales performance in the period by (0.2)%. Clothing sales increased 3.8% during the 19-week period, led by a strong performance in womenswear. In central Europe, the company is focused on reducing costs and driving “sustainable, profitable sales.” Seven fewer trading Sundays in Poland and additional public holidays in both Poland and Slovakia impacted like-for-like sales by (1.2)%. In Asia, comparable sales were impacted by the repositioning of its customer offer in Thailand. Outlook The company provided no new guidance and noted it is on track to deliver the ambitions outlined in October 2016: to reduce costs by £1.5 billion, to generate £9 billion of retail cash from operations and to improve group operating margins to between 3.5% and 4.0% by FY20. For FY19, consensus calls for Tesco to report revenues of £64.3 billion, up 11.9% year over year, and net profit of £1.18 billion, down 2.3% year over year.