Tesco Plc, Britain's biggest retailer, reported yesterday a better than forecast 5.9 per cent rise in underlying UK sales over the key Christmas period, driven by organic foods and its premium "Finest" range.
However, finance director Andrew Higginson urged the Bank of England not to "over-apply the medicine" of raising interest rates, saying consumers were under pressure even before a surprise increase in the cost of borrowing earlier this month.
"I'd be concerned that the Bank of England do not over-apply this medicine," he told Reuters in a telephone interview.
"The consumer has been cautious for the best part of a year, but has been prepared to spend up where they see value or where they want to treat themselves and they obviously decided they were going to have a good Christmas," he added.
Analysts had on average forecast a 5.6 per cent rise in UK like-for-like sales excluding fuel for the six weeks to January 6, with individual forecasts in a range of 5.4 per cent to six per cent, according to a Reuters poll of seven investment banks and brokers.
"Really good, top of the class numbers," said Exane BNP analyst Tim Attenborough. "It should be reassuring for the share price." Tesco shares hit a record high of 427-1/2 pence earlier this month.
Tesco has trounced rivals in recent years by expanding abroad and entering new product areas such as clothes and financial services. Its share of the British grocery market is over 30 per cent, almost twice that of its nearest rival.
It said total sales were up 9.9 per cent excluding fuel in the six-week period, with international sales up 15.8 per cent.
Britain's retailers have experienced mixed fortunes over Christmas, as debt-laden shoppers face higher interest rates and rising household bills. Supermarkets, with their cost-conscious appeal, have fared better than most.
Britain's second-biggest grocer, Asda, said earlier this month it beat its own Christmas sales forecasts, without giving a figure, while Sainsbury, the third-biggest, reported a five per cent rise in UK like-for-like sales excluding fuel in the 12 weeks to December 30. The fourth-biggest, Wm Morrison, posted a 6.3 per cent rise on the same basis in the six weeks to January 7.
Tesco said demand for organic foods was particularly strong, up 39 per cent over Christmas, while sales of its "Finest" meat and poultry products were up over 55 per cent.
Its online business Tesco.com, including pilot home-shopping business Tesco Direct, also performed well, with combined sales up over 30 per cent.
Higginson said Tesco was on track for a full launch of Tesco Direct in March or April.
Tesco shares have performed broadly in line with UK listed rivals since the start of 2006. They closed at 419-3/4 pence on Monday, valuing the firm at £33 billion.