Internet purchases supported a moderate rise in sales at Tesco, according to the FTSE-100 supermarket chain's latest trading statement published on Thursday morning.

Group sales in the six weeks to January 5th increased by 3.8% including petrol, while the international business performed at a similar level to the third quarter.

In the UK, like-for-like sales (excluding gasoline and value-added taxes) edged up by 1.8% (Consensus: 1%), propelled by stronger food performance than experienced in the previous year and a further improvement from the third quarter.

Perhaps due to the fact that sales were flattered by weak comparisons versus a year ago the firm emphasised that it was its best result in three years.

General merchandise performance - both in-store and online - was better than in the third quarter but was still a drag on the overall rate of growth.

On the above point Seymour Pierce points out that, "There is still much to be done given general merchandise remains a drag and we believe there will be no visibility on whether UK profits have bottomed until the second half of 2013.

"With inflation coming back and too many of its international businesses also facing trading issues currently, we reiterate our Reduce recommendation as we believe there is a high risk that things will get worse before they get better."

Even so, some other analysts seemed rather upbeat, with those at Deutsche Bank emphasising the fact that improvement was seen in all regions and formats.

For their part, over at Jefferies they are telling clients that: "We expect the group to confirm a further major reduction in capex focus at the April finals. A switch to growth at the Bank (following years of systems developments) and the annualisation of European/Korean headwinds later in 2013 should further help the return to appreciable earnings growth (and a rebuild in ROCE)."

Increasing online performance drove part of the rise in overall sales, with Tesco Direct purchases up by more than 16%.

Internet-purchased food sales increased by 18% over the five week Christmas and New Year period. This was underpinned by more than 500,000 food orders being fulfilled in the week before Christmas, with almost 5% of online goods picked up by customers using Tesco's drive-through "Click & Collect" service.

The group's international business performed at a similar level to that seen in the third quarter. Asia delivered an increase in total sales of 7.6%, with a slightly better like-for-like sales growth rate than the third quarter reflecting stronger performance in Thailand.

Following a period of nine months during which Philip Clarke temporarily led the group, the supermarket chain announced that Chris Bush had been appointed managing director.

Unfortunately, the outlook for the full year for the UK is unchanged. Furthermore, Tesco continues to expect the broad trends seen so far in the second half to continue through to the year-end, in particular the persistently tough conditions for consumers in Central Europe.

MF

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