Tesco, M&S and Debenhams in strong UK sales

Shares of UK supermarket leader Tesco fell despite the grocer’s strongest quarterly sales growth for more than five years, while Marks & Spencer rose as it reported its best clothing sales in more than five years.
Tesco, M&S and Debenhams in strong UK sales

Tesco shares fell at one stage as much as 4.1% in London trading after its report of UK same-store sales growth of 1.8% in the third quarter failed to meet investors’ lofty expectations.

Investor hopes had been heightened this week by Morrison Supermarkets’ best Christmas performance for seven years and robust industry sales data.

“Expectations got ahead of themselves,” Clive Black, an analyst at Shore Capital, said.

“The share price move is much more to do with analysts being in the wrong place, rather than Tesco,” he said.

Tesco chief executive Dave Lewis has revived the retailer as price cuts, improved service and increased product availability have lured UK customers back into stores.

Investors have returned too, with the shares up 38% last year. But the company’s progress slowed over the Christmas period, according to Hargreaves Lansdown analyst Nicholas Hyett, leaving investors “worrying whether the group can achieve sustained growth”.

M&S shares rose as much as 5.7%.

“Although like-for-likes were flattered by a shift in reporting periods, clothing and home still would have delivered positive growth,” Richard Lim, chief executive at Retail Economics, said.

The better-than-expected clothing sales indicate that M&S chief executive Steve Rowe’s price cuts and efforts to improve availability of popular lines are winning shoppers back.

Some of those customers are likely to be coming from rival Next, which reported disappointing Christmas sales, and department-store chain BHS, which collapsed in June.

Department stores Debenhams and John Lewis also reported sales growth.

Bloomberg

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