Tesco delivers strong Christmas - but boss warns of supply chain disruption

Supermarket giant Tesco said it enjoyed strong Christmas trading

TESCO said a surge in Christmas food shopping has driven "strong" recent sales which are expected to help offset soaring coronavirus costs.

But its boss has warned of possible supply chain disruption amid the difficulties caused by the new Irish Sea border as a result of strict EU rules when moving goods from Britain to Northern Ireland.

The supermarket giant is the latest grocer to report positive sales momentum over the Christmas period amid heightened Covid-19 restrictions.

But it now expects the pandemic to cost it £810 million this year, with the increased severity of the virus in recent months causing it to increase its previous prediction by £85 million.

The retailer said group like-for-like sales increased by 6.1 per cent over the 19 weeks to January 9, as it was particularly buoyed by 8.1 per cent growth during the final six weeks of the period.

Tesco said online sales grew by more than 80 per cent over the 19 weeks, as staff delivered more than seven million Christmas orders.

It told investors on Thursday that its large stores have seen sales grow strongly as customers favour bigger but less frequent shopping trips.

In the update to the stock market, the group also said its "comprehensive preparations and our strong relationships with suppliers" have allowed it to maintain strong levels of availability during the Brexit transition period.

However, chief executive Ken Murphy, who took the helm of the FTSE 100 firm in October, said "ready meals and some processed meat" have faced supply chain disruption into Northern Ireland and the Republic of Ireland.

"Ready meals have been the most affected as they have an eight-day shelf life so any wait is more likely to have an impact," he said.

"Some processed meat and some citrus fruit has also been impacted, but it is important to stress that our availability in the Republic and Northern Ireland is strong and is very strong in the mainland UK.

"We see this as a challenge at the moment, but not a crisis."

The boss said the chain has seen an increase in employee absences amid the recent increase in coronavirus cases.

He said about 30,000 staff are currently absent due to the virus, with about 7,000 of these staff shielding as they are highly vulnerable.

Mr Murphy said: "Our focus on looking after our customers, including delivering record availability, robust safety measures and great value, has enabled us to maintain strong momentum through the Christmas period, outperforming the market every week.

"We delivered a record Christmas across all of our formats and channels.

"Our colleagues went above and beyond, rising to every challenge in the most exceptional of circumstances and I thank every one of them for this.

"We're in great shape to keep delivering in 2021 and beyond."

Shares in the company moved 1.3 per cent lower to 239p in early trading on Thursday.

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