MarketWatch: Tough time for supermarkets

Tesco, Britain's largest supermarket group, announced plans today to create 10,000 new jobs by December despite suffering its most disappointing Christmas since the early 1990s.

The grocery chain said today that like-for-like sales, which strips out gains from new stores opened in the seven weeks to January 10, rose by 2.5 per cent, the smallest rise in Christmas sales since 1993.

By mid morning Tesco's share price had risen 1 per cent to 353.8p

Separate figures out this morning point to a slow Christmas on the high street, with the value of like-for-like sales falling by 3.3 per cent, the lowest figure since 1994, according to a survey by the British Retail Consortium.

Today's figures from Tesco add to growing evidence that the group is losing ground to rivals, such as J Sainsbury, which last week reported sales up by 4.5 per cent.

Sainsbury's performance over the festive period, the best in its history, was boosted by a 40 per cent rise in its cheaper "basics" range.

However, Tesco said that, adjusting for the 2.5 per cent reduction in VAT, which came into effect in early December, growth on a comparable basis was 3.5 per cent.

The company said that non-food sales had improved from the third quarter, with growth in electricals, clothing and entertainment.

Tesco said that it was expecting a difficult 2009, but denied suggestions that it was falling behind its rivals.

Andrew Higginson, the Tesco finance director, said that the company's underlying sales growth was driven largely by volumes rather than by price increases, as at many of its rivals.

Mr Higginson also announced that Tesco was planning to create 10,000 jobs this year, after Wm Morrison, a rival, said yesterday that it would add 5,000 positions to its staff numbers.

A spokeswoman for Tesco said that the new jobs would be implemented "across the board" and would be in place by the end of this year.

Total sales at Tesco grew 11.6 per cent, helped by strong international growth, where sales rose 32.7 per cent.

Europe also showed robust trading, up 24 per cent but the company did not split out sales from its American Fresh & Easy business, which has been open for more than a year, only to say that like-for-like growth is "strongly double-digit".

The company also said that savers were flocking to open savings accounts at its finance arm, Tesco Personal Finance, which is offering 3.6 per cent on its internet savings account.

It said that 1,000 savers a day had been opening accounts in recent weeks.

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