The UK's largest supermarket group, Tesco, has reported a sharp rise in sales over the Christmas period, helped by a ten-fold increase in internet shopping.

The figures were given in a trading statement, but the chain refused to comment on widespread reports it is preparing a bid for its ailing rival Marks & Spencer.

Tesco said like-for-like sales for the seven weeks to 8 January, covering Christmas and the New Year, were up 11.8%.

Total UK sales were up 7.8% in the 21 weeks to 8 January and grew 8.8% for the seven weeks.

"This growth is driven by a continued strong core UK performance, the increasing importance of non-food and our international expansion strategy," Tesco said in its statement.

Price cuts

Tesco said it had improved its share of the UK grocery market and outperformed the industry average.

Sales in central Europe and Asia had increased 80% since the half year and e-commerce risen ten-fold.

Analysts had been forecasting like-for-like growth of 4% for food and 5% for non-food items at Tesco.

When Tesco last gave a trading update in November, its like-for-like sales were up 4% although there were concerns about profit margins because of competition intensified by American retail giant Wal-Mart's purchase of Asda.

Tesco made £380m of price cuts in 1999.

There is now also the prospect of Tesco's main UK rival, Sainsbury's, becoming more of a threat after the appointment of highly rated Prudential chief executive Sir Peter Davis as its new boss.

Analysts said the Tesco figures beat their estimates but most of the talk continued to concern a possible bid for Marks & Spencer.

"The share price is telling us they are going to do something silly and it has become an issue," one said.

Tesco's refusal to comment on the rumours did not come as a surprise, given that a denial would rule out the possibility of it making a bid for six months.