UPDATE 2-Britain's Tesco joins rivals with COVID-related Christmas sales surge

14 Jan 2021 / 18:04 H.

    * Q3 to Nov. 28 underlying sales up 6.7%

    * Six weeks to Jan. 9 underlying sales up 8.1%

    * Estimate of 2020-21 COVID-19 costs rises

    * Maintains 2020-21 profit forecast

    * Tesco shares down 1.4% at 0938 GMT (Adds detail, CEO comments, shares)

    By James Davey

    LONDON, Jan 14 (Reuters) - Tesco followed supermarket rivals in reporting buoyant Christmas trading on Thursday, keeping its full year profit forecast despite rising costs from COVID-19.

    Britain's biggest retailer said UK like-for-like sales growth was 6.7% in its third quarter to Nov. 28, accelerating to 8.1% in the six weeks to Jan. 9, as coronavirus pandemic restrictions meant people splashed out on celebrations at home.

    "This was our sixth consecutive Christmas of growth and a record performance," Tesco's chief executive Ken Murphy said.

    "We outperformed the market for each of the six weeks over Christmas and we saw net switching gains from all key competitors," Murphy, who took over in October, told reporters.

    Tesco shares were down 1.4% at 0938 GMT after the update on trading, paring 2021 gains to 3.2%.

    Murphy highlighted a 14% rise in sales of Tesco's premium 'Finest' range, with 69 million mince pies and 8 million bottles of champagne and sparkling wine sold.

    Tesco's update follows strong Christmas reports from No. 2 Sainsbury's, No. 4 Morrisons and No. 7 Lidl GB.

    Industry data last week showed supermarkets saw unprecedented Christmas demand, with 11.7 billion pounds ($16 billion) spent on groceries in December.

    Coronavirus restrictions mean many people are working from home and the hospitality sector is closed, while many of the five million or so Britons who normally travel abroad for Christmas stayed at home instead.

    Tesco said sustained elevated sales were enabling it to offset additional COVID-19 costs, such as increased staff absence, that it forecast at 810 million pounds in its 2020-21 year, up from an estimated 725 million pounds in October.

    As a result it maintained its guidance for 2020-21 retail operating profit before exceptional items of "at least" the same level as 2019-20's, excluding the repayment of 535 million pounds of business rates relief.

    Tesco continues to expect to report a loss for Tesco Bank of between 175 million and 200 million pounds for the year.

    Last month, Tesco completed the 8.2 billion pound sale of its Asian business, paving the way for it to return 5 billion pounds to shareholders via a special dividend.

    Murphy also said that Tesco has seen some supply disruption to the island of Ireland since a post-Brexit trade deal with the European Union kicked in on Jan. 1. ($1 = 0.7336 pounds) (Reporting by James Davey; Editing by Kate Holton, Estelle Shirbon and Alexander Smith)

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