The food and drug retail sector was performing well on Thursday afternoon, with a strong rise from Tesco offsetting weakness elsewhere.

Shares in supermarket giant Tesco were up 2.28% at 357.1p in afternoon trade today after the company's trading update for the six weeks to January 5th. Sales during the period including petrol rose 3.8%.

Like-for-like UK sales excluding petrol and VAT rose 1.8% in the six weeks to January 5th, above the consensus estimated growth range of 0.5-1%.

Oriel Securities upgraded the stock to 'buy' this morning, raising its target price for the shares from 325p to 400p.

Sector peer Sainsbury was heading the other day, down 1.34% at 324.8p, extending losses after reporting yesterday a slowdown in LFL sales growth in the third quarter.

A rise by Tesco, with a market capitalisation of around £28.6bn, was able to lift the wider sector average higher today, offsetting a fall from smaller rival Sainsbury (market cap: £6.1bn).

While Credit Suisse today labelled Sainsbury's third quarter as "robust", the broker has decided to take a more cautious view for the supermarket's outlook for 2013/14.

The broker said: "Given both the CEO's view that the current trend of negative volumes has maybe another year to run and Sainsbury's slower Q3 growth, we think it now prudent to cut our 2013/14E LFL assumptions - to +1%, from +2.5%."

Competition heats up

Competition between Tesco and Sainsbury heated up today after Sky News claimed that an executive at Sainsbury's had issued an email to City analysts asking them to question Tesco's latest trading update.

The unnamed alleged source, which Sky News referred to as a "senior member of Sainsbury's investor relations team", reportedly questioned the appropriateness of an accounting technique applied to calculate Tesco's LFL sales over a five-week period.

Tesco's trading statement for the five-week period covering Christmas and New Year referred to two separate figures for its LFL sales. In the first paragraph of Tesco's trading statement, the chain referred to LFL sales increasing by 1.8% whilst further on in the report's appendix it referred to a IFRIC-13 compliant LFL sales growth of 1.4%.

An excerpt of the alleged email from the unnamed Sainsbury's source was published on Sky News quoting the following statements: "I thought it worth pointing out that the UK [like-for-like] number of 1.8pc that Tesco are reporting this morning is non-IFRIC compliant [...] This is a bit disingenuous, they should be using the 1.4% number in their headline. All of our reported numbers are IFRIC compliant, as they have to be under IAS18!"




Top performing sectors so far today
Technology Hardware & Equipment 1,037.97 +3.35%
Automobiles & Parts 5,592.65 +1.66%
Food & Drug Retailers 4,259.28 +1.42%
Oil Equipment, Services & Distribution 24,809.80 +1.41%
Industrial Metals & Mining 3,018.47 +1.09%

Bottom performing sectors so far today
Forestry & Paper 7,507.64 -1.27%
Mobile Telecommunications 3,836.99 -0.84%
Electricity 9,111.70 -0.81%
Food Producers & Processors 6,416.12 -0.65%
Beverages 13,167.50 -0.61%

BC

Related share prices
Sainsbury (J) (SBRY) share price
Tesco (TSCO) share price