Tesco PLC

Good morning, everyone, and a very happy new year. Thank you for joining us today for our quarter three and Christmas trading update. As usual, I'm here in Welland with Imran, and I'll start with a brief overview of our performance before opening the line for your questions. We are delighted with the way the customers have responded to our continued investments in value, quality and service. Group like for like sales grew by 2.9% over the 19 weeks, including 3.7% growth in the UK. Customer satisfaction improved and our UK market share is at its highest level in more than a decade, following 32 consecutive periods of gains. We set ourselves a challenging plan for Christmas and we delivered in line with that plan. With over 2 billion products going through our tills and more than 6 billion pounds of sales in the four weeks to Christmas Eve, our teams right across the group worked hard to deliver the outstanding service that customers have come to expect from Tesco. I would like to start the call today by saying a huge thank you to them for delivering a Christmas we can all be proud of. Our performance builds on last year's successful results and reflects the strength of our core food offer. In a highly competitive market and with customers looking to make their money go further, we saw particularly strong growth in fresh food, with like-for-like sales up 6.6% in the UK. Running alongside familiar festive favourites, we launched 340 new and improved own-brand Christmas products, including 180 in finest. We recognise that for many families, the cost of Christmas can be a stretch. We did everything possible to make sure our customers got the best value from us, starting with our fresh Christmas dinner for a family of six for under £10. At just £1.59 per person, it was even better value than last year. More broadly, our rate of inflation eased through the Christmas period and continues to be materially behind the market. We also invested in making the Christmas shop even easier for customers, including hiring over 28,000 additional colleagues. And with support from AI-powered scheduling tools, we offered more than 100,000 extra online delivery slots in the week before Christmas. Through better forecasting and planning, AI also helped us to deliver best-in-class availability and to optimize deliveries across our network. Customers continue to embrace finest, with sales growth of 13% in the UK, including a 22% increase in our finest party food range. Highlights included Christmas centerpieces, such as our finest turkey crowns and chef's collection Beef Wellington, as well as our curated finest gifting range and a long list of award-winning products. We sold around 21 million finest pigs in blankets, along with 2.5 million bottles of finest Prosecco. We also saw a strong demand for low alcohol options, including selling almost a quarter of a million bottles of nose echo. While turkey retained its popularity, some customers opted for other meats this Christmas, with sales of beef joints up 29%, making it the most popular alternative. Online remains our fastest growing channel with growth of 11% across the 19 weeks. It was our biggest online Christmas, including our two busiest days ever. In the week leading up to Christmas, we delivered on average two orders every second. Woosh also performed strongly with sales up 47% and more than a quarter of a million customers trying it for the first time. Both in-store and online, customers benefited from additional value through Clubcard. Alongside thousands of Club Card prices per week across a broad range of family favorites, we offered customers more personalized rewards, including gamified experiences with Club Card challenges. Our retail media offering continues to engage customers and brands, including the return of sponsored Christmas grottos now in their third year. The Tesco Media team continued to make great progress, and we were delighted to be named Media Brand of the Year at the Media Week Awards. In Ireland, we built on last year's strong performance and are now in our fourth year of market share gains with fresh food continuing to lead the way. With five openings in the period, including two large stores, we now have 190 stores in Ireland. We continue to roll out Woosh, which is now available in Dublin, Galway and Cork. Booker performed well despite challenging market conditions, with increased customer satisfaction scores in both core, catering and retail. Our wine and spirit specialist Venus continued to win new business and in our symbol brands, Premier opened its 5,000th store. In Central Europe, our targeted price investments contributed to growth in both food and non-food across the period, despite a backdrop of subdued consumer confidence and increased competition. Value continues to be a key priority as customers seek to make their money go further, and we're determined to do everything we can to help. Earlier this week, we launched a new commitment to everyday low prices on over 3,000 branded products, alongside our existing Aldi price match on more than 650 lines and thousands of club card prices. Our strong performance this Christmas gives us the confidence that group-adjusted operating profit will now be at the upper end of the £2.9 to £3.1 billion guidance range that we issued in October. We continue to expect free cash flow within our medium-term guidance range of £1.4 to £1.8 billion. So as we move to your questions, I just want to say another big thank you to all our colleagues for everything they did to help our customers to have a brilliant Christmas. Thank you all for listening, and I'll now hand back to Sergey.

Thank you, Ken. Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad now. And please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. If you wish to cancel your request, please press star 2. Again, please press star one to ask a question. Our first question is from Rob Joyce from BNP Paribas. Please go ahead.

Hey, good morning. Happy New Year. Thanks for taking the question. For the first one, can you reference the easing food inflation over Christmas? Was that the entire driver of the slowdown versus 3Q? Are we seeing any sort of broader volume slowdown in the market? And do you think the overall market stepped down over Christmas? That would be the first one. And the second one is probably a bigger question, but clearly guiding to a broadly flat EBIT this year after strong top-line performance. What do you think needs to change for you or the market for you to be able to return to profit growth? Thank you.