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Last Updated: Tuesday, 18 January, 2005, 16:52 GMT
Bumper Christmas sales at Tesco
Tesco store in London
The company plans to trial non-food stores
Tesco has reinforced its position as the UK's leading supermarket chain after a strong jump in Christmas sales.

The retailer said like-for-like sales in the seven weeks to 8 January were up 7.6% on a year ago and that it was set to make a 2bn ($3.7bn) annual profit.

It added that, excluding petrol, its prices were down 1.6% on last year.

Tesco said it was "delighted" with its results. Other retailers such as Marks & Spencer and Sainsbury's have had a much more lacklustre festive period.

Despite the strong figures, Tesco's shares closed down nearly 3% at 313.75p after some analysts said they had been expecting even stronger sales growth.

International sales

Tesco - which takes about one pound in every eight spent in Britain's shops - has reinforced its leadership of the grocery sector in recent months, increasing its share of total consumer spending to 29%.

Non-food sales have helped fuel the company's growth and were worth about 7bn to Tesco last year.

"This company is powering away from the competition - it is a stellar performance," said BBC business editor Jeff Randall.

People have been asking: where did all those customers go from Sainsbury's and Marks & Spencer? Now we know, they went to Tesco
Jeff Randall, BBC Business Editor

The company has a 6.5% share of sales of non-food retail in the UK, with sales of items such as chart music, books and health and beauty products, its own-label clothing ranges, and electrical goods.

Overseas, it saw its international sales grow by 16.1% over the Christmas and New Year trading period, despite tough trading conditions in some central European markets.

"The group's strong sales performance means that, despite higher energy and fuel costs and adverse movements in exchange rates, we remain confident that our out-turn for the year will be in line with current market consensus," it said in a statement.

Customer choices

"It's a very strong UK performance as expected, internationally as well," said Sanjay Vidyarthi, a retail analyst at brokers Teather & Greenwood.

"Possibly some analysts were expecting them to increase estimates, which is normally the case with Tesco. In that light there might be a little disappointment, but it's still a very strong performance," he said.

However, charity New Economics Foundation (Nef), which campaigns to prevent a decline in neighbourhood shops and services, said Tesco's success meant "the death of diversity on UK High Streets".

"Four years ago the Competition Commission said our supermarkets were too concentrated and abused their market power, now the situation is worse and nothing has been done," said Andrew Simms, Nef's policy director.

"Tesco's triumph is at the expense of local economies, small suppliers, independent stores and consumer choice".

The Tesco performance comes after weak Christmas trading by rivals Sainsbury's, Marks & Spencer, and Morrisons.

"People have been asking: where did all those customers go from Sainsbury's and Marks & Spencer? Now we know, they went to Tesco," said Jeff Randall.

Tesco finance director Andrew Higginson said the company was aiming for growth of 3-4% this year.

"Consumers have a choice of places in this country where they can shop, and they make that choice every week. If we do a bad job they will go somewhere else," he said.

Mr Higginson also confirmed that although plans for a non-food store were still at the "embryonic" stage, there would be a trial later this year.

Find out the secret of Tesco's success

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