Hello, and welcome to the TESSCO 3Q and Christmas Trading Call. Today's meeting will be hosted by Ken Murphy, Chief Executive Officer and Alan Stewart, Chief Financial Officer. Today's call will be audio only. Throughout the call, all participants will be in a listen only mode. And afterwards there will be a Q and A session.
Questions will be taken via the phone line. To avoid delays. Just to remind you, this call is being recorded. To start the meeting today, I'm pleased to hand you over to Ken Murphy, Chief Executive Officer. Please go ahead.
Thank you, Tracy. Good morning, everybody, and a very happy New Year to you all. Thank you very much for taking the time to join Alan and I this morning. I'll start by sharing a few reflections on Christmas performance, and then I'll talk you through our ongoing response to the pandemic before we open the call to your questions. We knew going into the festive period that this was likely to be a different celebration.
And so I want to start by thanking our colleagues for their heroic efforts in ensuring our customers could still celebrate Christmas this year. There was a lot of uncertainty, but the business responded with a real sense of teamwork and everyone from stores to distribution through to our product and customer teams play their part brilliantly. This was our 6th consecutive Christmas of growth and a record performance. We outperformed the market for each of the 6 weeks over Christmas and we saw net switching gains from all key competitors. We had a really strong Christmas campaign and our ad got particularly high ratings with customers for effectiveness and emotional engagement.
Detailed planning ahead of Christmas ensured our customers could shop safely and the comprehensive preparations for Brexit meant that we smoothly managed any potential for disruption. Our supply chain team did a fantastic job. And despite all the challenges, product availability reached record levels in December. Our customers also planned ahead. Customers shopped a little earlier than normal with our busiest shopping day being on the 21st December.
To give you a sense of the scale, Our colleagues sold over 110,000,000 products on that day. All our formats and channels grew, but I want to call out This record Christmas for online. Online sales rose over 80% versus last year and over Christmas. We delivered more than 7,000,000 orders. We continue to lead the market online capacity and we have more than 786 vulnerable customers registered with us who are eligible for priority access.
We had a fantastic range for customers this Christmas, offering both high quality and great value. With more customers celebrating at home, many took the opportunity to treat themselves. Finest sales grew over 14% this Christmas. Our customers enjoyed 69 1,000,000 individual finest mince pies and took home nearly 8,000,000 bottles of champagne and sparkling wine. As demand for large turkeys was unsurprisingly lower this year, our smaller meat products sold really well, With beefsteak seeing over 100% growth and sales of our smaller finest roast turkey breast up 190%.
In the run up to Christmas, our research told us that over a third of households were going to be catering for an alternative diet this year. To make that easier, we had our biggest range of plant based Christmas food available, including 9 vegan centerpieces. Our Plant Chef pigments blankets were a favorite. Customers ate their way through 650,000 of them. And overall sales of the Plant Chef brand We're up 90% in the run up to Christmas.
More broadly, sustainability was important to many customers this Christmas. We took 20,000,000 pieces of plastic out of this year's Christmas range. And by the end of December, we'd hit our target to remove a total of 1,000,000,000 pieces of plastic from our business. The work we have done on value also put us in great shape too. We're the most competitive we have been in nearly a decade against the entire market.
And since Aldi Price Match launched in March, Value perception has increased by 4.50 basis points. Clubcard prices launched in September and since then Clubcard app has gained another 2,000,000 active users. 80% of transactions in large stores now use a club card. More broadly on the brand, we also saw a marked improvements in the overall brand health index over the period. In Ireland, total sales grew by 12.4% over Christmas with a really strong performance in our large stores.
All the work that has been done to improve the customer experience really came together this Christmas. Online is a big focus in Ireland too, where we are the clear market leader with online sales up nearly 70% as we increased capacity to support record demand. Booker has done a fantastic job in very difficult circumstances. Total sales grew by 12.4% in the 19 weeks and by 6.7% over Christmas. For a strong performance from the retail side of the business, which continues to support thousands of small business and independents.
The catering market was heavily impacted by restaurant closures at Christmas time, with catering sales down nearly 50% over Christmas. While of course that will weigh on Booker's profitability this year, it's well placed to continue outperforming the industry in what is a very difficult market. Total sales in Central Europe declined by over 4% at this Christmas. The team were well set up to serve customers in Central Europe, But sales were impacted by COVID-nineteen restrictions, such as limits on the sale of non food, evening curfews and Sunday trading bans. Now turning to COVID-nineteen, this has been a really difficult year for so many people.
We talk often about Professional challenges that our colleagues have faced, but I'm very aware that it's had a personal impact for all of us too. I'm so proud of the TESSCO colleagues and more broadly retail workers for digging deep and carrying on day after day looking after customers. Throughout the pandemic, we have been very responsive to all the challenges that it brings. Our approach remains the same, to provide food for all, Safety for everyone, support for our colleagues and help for our communities. Our current estimate of the costs associated But our response to COVID-nineteen is around £810,000,000 for the full year.
The most significant cost is people. As we support our colleagues with paid accesses and have recruited thousands of temporary colleagues. We have also had one off costs such as screens and signage as well as the ongoing costs of things such as increased hygiene, which we expect to be with us for some time. On Food For All, As I mentioned, availability has held very strong throughout the period. And I want to thank all our suppliers for their partnership.
I'm very proud that the 2020 Advantage survey, suppliers named Tesco as the number one retailer for collaboration during a crisis. This week, we have extended our improved payment terms for the smallest suppliers until the end of our next financial year. Since the start of the pandemic, we have made significant investments in safety and social distancing measures across every one of our stores, so that people can shop safely and with confidence. These include limits on the number of customers in store, A traffic light system in more than 1300 stores, social distancing signage, sanitizing stations, protective screens at checkouts and face coverings and other protective equipment for colleagues. While I'm grateful to the vast majority of customers who have been supporting our measures throughout, this week To further protect our customers and colleagues, we strengthened the rules on face coverings so that we won't let anyone into our stores who isn't wearing one unless they're exempt in line with government guidance.
In response to the latest government guidance, we have asked our 7,000 most vulnerable Colleague to remain at home on paid leave. We have seen an increase recently in colleagues needing to self isolate, but over Christmas, We had support from around 35,000 additional temporary colleagues on top of the 11,000 we would usually hire for the Christmas period. I'm delighted that many colleagues who joined for Christmas will be staying on in the coming weeks. I'm so grateful to everyone for getting stuck in. And I'm very confident we will continue to deliver for our customers every day.
In 2020, We did what we could to help communities across the country. And over the last year, we donated over £60,000,000 worth of meals to food banks and charities, including a £4,000,000 cash donation to FareShare and the Trussell Trust to support them through the busy Christmas period. So in conclusion, I'm really proud of the business and everybody in it. As I mentioned at the beginning, every single colleague has stepped up for customers. Our focus on looking after our customers, prioritizing safety, service and availability alongside great value has contributed to a record Christmas.
And I'd like to say a big thank you to the whole TESSCO team for their efforts. And with that, I'm happy to take any questions you might have. Thank you.
Thank you. Or hashtag to cancel. There will now be a brief pause while we register your questions.
Thank
you. Our first question comes from the line of Andrew Gwynn of Exane BNP Paribas. Please go ahead. Your line is open.
Hi, there. Good morning. It's almost like announcing a winner of a result. It's taken quite a while. Anyway, so just two questions for me.
You mentioned there a couple of times, obviously, the COVID costs have stepped up more recently and clearly a painful situation for many people. I'm just wondering to an extent would you expect those COVID costs to drift into the next financial year? Obviously, I appreciate that's A difficult question to answer, but some early thinking there would be much appreciated. And obviously, aside from the obvious, the other big feature Of Christmas for me certainly in store was the Clubcard initiatives, obviously shifting promotions almost exclusively on to Clubcard. Just wondering if you can elaborate on how that impacted the business, any kind of material takeaways you would talk about?
And then also just very briefly on the Clubcard Plus, Maybe it feels like that's beginning to build a bit ahead of steam, but any statistics, any numbers you could share would be very much appreciated. Thank you.
Hi, Andrew. Many thanks for the questions. On the COVID costs, I think The truth is a lot of the one off costs I think that you could say are in the rearview mirror, but that the cost That kind of linger with us are a combination of people costs and the ongoing costs of maintaining safety in the store, so Sanitization, etcetera. And really, the biggest cost by far is the people cost. And that is quite simply going to be a function of the rate of infection and the need to shield people and the continuing abnormally high demand levels.
So what I think you can Takeaway is that as infection rates subside as the restrictions Ease as people start eating out again as the need to shield people reduces, we will see A corresponding level of reduction in COVID ongoing COVID related costs. What I can't guarantee is they'll disappear completely. I think we will see ongoing Sanitization costs ongoing kind of social distancing for some time and that we expect those to Last well into the New Year. And of course, we'll also, I think, see a sustained demand for online Delivery, etcetera. So that's our early thinking.
I think it feels really early or premature to try and put a number on that, but we're staying very close to it. And of course, we'll give you hopefully a more precise update at the year end. In terms of club card prices, we have been very clear that our strategy has always been that Aldi price match is all about underpinning value. Rather than it being a kind of a leader of and a driver We think it's designed to eliminate a negative. So it eliminates a reason why you wouldn't shop Tesco because We're reassuring customers that the value they'll get in Tesco is as good as the market leading value, which we think encompasses the whole market, not just Audi.
Clubcard prices is really all around rewarding our most loyal customers. And that we have found to be very successful. And we are continuing to see kind of increases in participation. As I mentioned, there has been a surge in club cards usage And the surge in digital downloads of the app, which we think is part of the journey that we are going on to make Sure that we are able to respond to all the individual needs and wants of our customers and particularly of our best customers. With Clubcard Plus, we're happy with the way Clubcard Plus is going.
I don't have any specific numbers To update you on that. I might pass you over to Alan who might put a bit more color on it. It remains a strong Offering for a proportion of customers and they tend to be very high value customers. So it is highly valued by a part of our customer subset. Alan, anything you want to add to those?
Thanks, Ken. Good morning, Andrew. The only thing I'd add is that It's clearly a proposition which is aimed at in store shopping. We've seen very strong in store shopping. We haven't made your targets because of all of the other aspects.
But we're very clear that it continues to be part of our armory going forward and we expect that to continue. But it hasn't been a major focus for us over The course of the last year, really because of all of the things we've been talking about.
Okay. Thanks guys and happy New Year. Thanks.
Happy New Year, Andrew. Thank you.
Thank you. And our next question comes from the line of James Anstead of Barclays. Please go ahead. Your line is open.
Good morning, Ken. Alan, a couple of questions for me, if that's okay. So Firstly, on Booker, you mentioned that you think it's outperformed the catering market as a whole. I wonder if you can just remind us Roughly what Booker's share is in the Canadian market and if it's possible to give us any idea on how much share you think it's gained this year and perhaps whether that share gain has Accelerated as the year has
gone on. So that'd be
one question around the Booker and Cher. And the second thing would be, I know that Tesco doesn't typically I'd like to comment on competitors in these sorts of calls, but clearly one of your big initiatives last year was ALDI price match. And I wanted to know whether You've seen any sign of ALDI reacting and bringing down its own prices? Thank you.
Thank you, James. So interestingly enough, we tend not to get overexcited per se with market share in the distribution market for catering because barriers to entry are very low. It's a fickle market. Both customers and distributors enter and leave the market on a regular basis. And really the Focus of the Booker team has always been around the quality of earnings and the quality of business that it maintains.
So It has been focused on winning share with the best customers in the catering market and it continues to do so. We don't get overexcited about market share because this is a market that's 10 new distributors will appear overnight in the catering industry. I think where Booker has been brilliant is that has really focused on making sure that it's always looking after the best quality operators in the market and making sure that they get the highest standards of customer service. And then of course, typically, they're the ones that weather the storm the best. And therefore, our relative share of market Grows and we grow with them.
So I don't particularly want to put a precise number on it. Alan may wish To add more value or add more commentary to that, but all I can say is that our expectation is that at Booker will emerge from This crisis a stronger business, even stronger than it is today. In terms of Aldi price match, of course, We have seen ALDI react and we have responded to ALDI. I think what they have realized and what the market Realize is our determination to maintain great value for customers. And I think They see it and we see it not in any way as a price war at all.
We see it they see it as much more kind of A statement of intent that we will provide good value and we will respond In whatever way we need to. And that I think has meant that we've been Able to kind of maintain that position without destroying value. And I think that's Really the important message.
That's very helpful. Thank you.
Thanks, James.
Thank you. And our next question comes from the line of Nick Coulter of Citi. Please go ahead. Your line is open.
Thank you. Good morning and happy New Year. 3, if I may, please. Firstly, would you be able to share the exit Rates or latest number of orders per week for GHS and broadly how that breaks down by delivery and collects, please. And on delivery Sabre, could you talk about the uptick there?
And in more normal times, I guess, what that might mean for frequency and share of spend if We migrate onto the subscription fee for delivery saver. And then lastly, for Booker and Booker's Wholesale to retail. Could you give a sense of the shape of the 14% growth between the Q3 and the 6 Speaks please. Thank you.
Sure. No problem, Nick. So Broadly speaking, the GHS order rate, it is running at about $1,250,000 a week. And we are seeing about 25% of that being click and collect. So that's kind of the average.
Sorry, just remind me of your second question again.
It was on delivery saver and the uptick and what that might mean obviously Postpaid, what you've seen previously in terms of what that might be, frequency, share of spend, but the behavior as people migrate on to delivery saver?
Well, I think what the kind of uptick in Delivery Saver means From my perspective, and I think that this is shared more broadly in the industry is that online penetration or at least proportion of online penetration That will be the dramatic increase we've seen over the last 12 months is here to stay. And that it's becoming institutionalized as part of customer behavior. Because as they've gotten into the rhythm of it, they've got comfortable with it, they've got their kind of regular shopping list, they find it very convenient, They probably even get to know the drivers. It's just become an institutional part of their shopping habits. So our thinking is that a reasonable proportion of the online increase in online penetration we've seen this year is here
And do you take that Delivery Saver subscription rate? It looks like it's kind of broadly half of Your weekly stops. So is that an indication of how much sticks? Or would you think more sticks?
I think it will be a bit more than that. I think that some people like the optionality, but We'll continue to use the service without the delivery saver. And then there could be even amongst the proportion Of customers not using, there could just be a lack of awareness. So as we kind of reinforce and remind customers of that proposition, we would Expect a steady increase in the proportion of customers using the Delivery Saver option over time.
Thank you. And the last one was just on Booker's wholesale to retail and the shape of the 14% between Q3 6 weeks, please.
Yes. So starting with the last part first. So the Christmas trading For Booker was a positive sales change of 6.7%, but minus 8.3% on a like for like basis, Because the best food logistics had a significant impact on the total sales increase over the Christmas trading period. For quarter 3, the sales up increase for Booker was 15%, but flat on a like for like basis.
I'm asking about the retail element. So retail versus catering. So I think you gave a 14% figure and it was How that 14% breakdown between Q3 6 weeks?
I don't have that number.
Ken, I can give a little bit of color on it in terms of the color. What we saw is that the in Q3, particularly, If you look at Q2 and Q3, they were actually pretty much the same percentages of impact. But actually, the shape within that was very different. So as the Itang out became stronger, so Booker saw A drop off in its retail sales and the increase in its catering sales. That was the exit in Q3.
As that then came to an end and as we got more constraints, so we saw retail picking up quite strongly. And the element of catering falling off. So the retail 14% It's actually a mix, Nick, in terms of shape. And that's something which I think is something we'll continue to see in the Booker business because of that mix between People shopping locally, shopping from the book of retail partners, when they're particularly constrained and needing to shop locally. And then as soon as they're able to eat out, they stop doing that.
And we've seen that, particularly in Booker over the course. So whilst the numbers are pretty flat, And the shape within it is definitely impacted by external events.
Super. That's very helpful. Thanks so much.
Thanks, Nick.
Thank you. And our next question comes from the line of Andrew Porteous of HSBC. A
few from me. Just can
you come back on online?
I mean, you talked about the fact that December was a record period, I think, in terms of profitability. Was that more driven by mix with a lot more click and collect in the mix than usual? Or have you seen the home delivery profitability improve as well? And then could you perhaps talk about what advantages you think you have in online? Does your scale mean that you should be structurally Higher from a profitability perspective than any of your competitors can get to, given your drop densities.
And then The last question I had was really, you talked about net switching gains for a lot of people. I think if you look back over the past year, clearly, the business is in much Better shape sort of strategically. I'm just wondering how you think you hold on to those gains in a more normal sort of trading environment and sort of what your thinking is around that?
Great. Thank you, Andrew. So I think the online profitability Story is one of ongoing improvements. So we have increased the number of Click and Collect slots over the quarter 3 period. We're refining all of the time the picking methodology, van routing, The kind of efficiency of our kind of process from order taking through Delivery at the door.
So we are on a kind of a constant trend of improvement. And I absolutely would say that our scale and our densities is an asset and as is our reach. And increasingly our flexibility, our ability to respond to surges in demand Much more locally, I think is an advantage. So this is, I think, an ongoing journey, Andrew. The important thing that we want to iterate and state today is that we're committed to the online channel.
We think it's a channel that's here for the foreseeable future and will only get stronger. We think that having been forced into this channel in the And having years accumulated years years of experience, we're really well placed to maintain a constant rate of improvement of the customer experience To open up an increasingly convenient and frictionless experience for them and to do it at great value. So that's Where we think our advantages lie. In terms of the switching games, I think that Trying to pinpoint one single factor for those gains has been difficult. What we have come to The conclusion on is that it is the culmination of brilliant customer work, brilliant product work, Brilliant supply chain work, brilliant in store execution and a kind of a returning trust in the brand that it will do the right thing for customers and we'll do the right thing for the community.
And actually seeking to take a leadership position in the market. So That I think it's those combination of factors that we think will continue to serve us well As we seek to hold on to those gains into the New Year and also make us agile enough and flexible enough to respond to whatever changes Come down the track in terms of customer habits and customer needs.
Thank you, guys.
Thanks, Andrew.
Thank you. Your next question comes from the line of Clive Black of Shore Capital Markets. Please go ahead. Your line is open.
Good morning, gentlemen, and a very, very happy New Year to you. A few questions from me, if I may. Firstly, you say that you've Your outperformance was market leading over the Christmas period. I just wondered on what measure that was based. Just interested to know that context.
Secondly, Ken, do you think that your online and offline activities can have Similar rates of contribution to the business in the UK at any stage in the foreseeable future. And then lastly, Just more broadly from the context of a trading statement, I just wonder if you think we're reaching a point with the UK government where There may be a fundamental reappraisal of business rates. And alongside that, an introduction of Digital taxation that perhaps balances online and offline fiscal policies. Thank you very much.
Thank you very much, Clive, and Happy New Year to you too. So in terms of a market leading performance, we as you know very well, monitor our performance relative to the market through kind of 3 different independent bodies that measure market performance and our performance relative to it. What we can tell you is that we beat the market consistently every week through the 6 week period of Christmas trading. And so that's really what's underpinning our definition of a market leading Christmas. I do Except that the headline numbers of some of the other retailers is better.
But as you know, because of different trading periods, different definitions of like for like, It's not all of it as clear cut. So we're very comfortable that the measure we used is a very robust one and a relevant one And underpins our kind of relaxation that we have achieved a leading Christmas performance. In terms of online versus offline contribution, we're getting closer all the time, Clive. So it's been a continuous improvement journey. And we have a number of plans in place that we think will take us closer to parity in terms of operating contribution From online equivalent to offline.
We're not there yet, but we believe we can see our way there. By your definition, foreseeable future, I would say absolutely yes. It is possible in the foreseeable future. And on your third question in terms of the business rates, we believe that The decision by the industry to return the rates relief in conjunction with the fact that the government is already running a consultation Process with the industry has put into stark relief just how big the burden of rates is on the retail business, how dramatically that rates burden has grown despite no extra sales coming from The stores that are bearing that burden and how the transfer of that business online does require fundamental reformation of the rate system. And we do believe that it should be offset by a digital tax.
So we believe the governments are taking it seriously. And we sincerely hope that they respond To all of our urging to make the changes that we think are necessary. I think we mentioned That in an independent report commissioned to look at leveling up, it found that the areas Most in need of inward investment for which retail is disproportionately important from an employing perspective are the worst Just in terms of rate. So it's actually having exactly the opposite of the intended effect that the government would desire.
Thank you very much for that Ken. My only final comment is I am sorry for the disappointment of Munster versus Ulster over the Christmas period.
That's all right, Clive. We bounced back with a win against Connacht, and we're still top of the table. So I'm pretty relaxed about it. Also played very well, Clive. I'll give you that.
Happy New Year.
Happy New Year.
Thank you. Our next question comes from the line of Shreedhar Mahamkali of UBS. Please go ahead. Your line is open.
Hi, good morning. A couple of questions on online and just another one on the profit outlook, please, if I can. So firstly, in terms of online, can you give us any thoughts, early thoughts perhaps in terms of West Brom, UFC On how that's shaping your thinking, what the learnings are so far? And secondly, I know you've shared a few thoughts, Ken, in terms of continuous improvement, maybe just if I can just take one metric in terms of pick rates in store. Are you able to say they are now where they were pre pandemic?
That's the second one. And maybe just kind Stepping back in terms of the outlook for the year, in terms of profit, just trying to understand why you maintain the outlook For profit for the year despite very good trading performance. I know there are some clear puts and takes here, especially Booker, Etcetera. But if you could talk through what some of those others would be super helpful. Thank you very much.
Thanks, Sreedhar, And happy New Year to you too. So starting with your first question, the West Broms UFC continues to perform strongly. So we are seeing it now approaching the expected pick rate that we were that we had in the business case. So it is delivering on all the metrics That we hoped it would do. And as you know, we will have our second UFC open in Lakeside very soon and it will have an even higher pick rate than West Bromwich.
So really, We are progressing our UFC tests and trials. We're watching and monitoring very closely. We're very pleased with the progress. And once we kind of Move to a more meaningful kind of investment. I'll be sure to update all of you on that.
All I can tell you is that it's progressing As we expected. Pick rates haven't returned to the pre pandemic level because there are a number of safety Measures that we have to take in terms of picking. That means that we are operating at about 10% To 20% lower in terms of pick rates that we would have had pre pandemic. We know very Clearly, how to get those pick rates back up. But in the interest of safety, we have to live with it for now.
And in terms of profit guidance, I think that you answered the question yourself. In essence, We have a number of puts and calls. We have had a series of additional costs associated with the pandemic, which we've flagged to you in terms of absence rates, in terms of paid leave and shielding, In terms of the extra Christmas bonus, etcetera, and of course, in terms of the continued pressure on the catering market, which means that We think at this stage that where we are is an unchanged picture in terms of the profit guidance we gave at the half year. Thank you. Thank you, Sreedhar.
Thank you. And your next question comes from the line of Victoria Petrova of Credit Suisse. Please go ahead. Your line is open.
Thank you very much, and Happy New Year. I have 3 short questions. First, it's on online and cannibalization. As far as I understand, your online market share has significantly improved. You talked about $5,500,000,000 of Sales in 2020, 2021, potentially even $6,000,000,000 Your figures are very strong.
Who are you taking market share from in online? And also, can you provide some clarity on What percent of your online sales is cannibalized from your existing stores and existing customers and what percent is new? As well as when we look at the EUR 800,000,000 COVID costs, what percent of what Amount of it is associated with your online ramp up. That's my first sort of group of questions. The second one is on discounters.
Can you qualify or quantify the uplift of sales you were getting from discounters losing market share in 2020. And do you expect it to continue? Or it's a COVID in your view, a COVID specific development? And my last question is very similar to the previous one. Aren't you expecting any operating leverage in the second half driven by this additional Uplift and Sales.
Thank you very much.
Thank you, Victoria, and Happy New Year.
Thank you.
Okay. So let's talk about R9 first. So the roughly we think that the rate of new sales, additional sales is about 70% of the online sales So we think the cannibalization rate is about 30%, give or take. And we think that a proportion of that, we will keep. What we don't know Is what the rate and by how much sales will either revert back to easing out and To shopping in store as the pandemic ease, is that something that we just don't have a feel for at this stage.
In terms of the COVID cost of $800,000,000 we don't really give a breakdown of How much is associated specifically with each channel? So it's a reasonable proportion, but a large Part of the COVID costs that we talk about are really the exceptional costs that we incur in terms of employee bonuses, In terms of shielding, in terms of covering for absence, in terms of the PPE and sanitization equipment and consumables that we need to provide. So That is it on COVID costs. And again, in terms of the discounters and how much market share, I mean, I think what we've seen It's really a bifurcation in the discount or performance, but obviously Lidl having a very strong performance and Aldi And Audi not. We don't think that our Audi price match is Actually necessarily directly impacting Aldi.
We're seeing switching from everyone and really our intent Isn't to go after Aldi, it's actually to underpin a value message to our customers against In the entire market really and that's our continued desire. So we're really interested in eliminating Aldi As a negative rather than our price as a negative rather than going after one particular competitor.
And in terms of online, who do you think you are taking most of market share from? Is it Tokado? Or is it Because you seem to be growing as one of the fastest and you're obviously the biggest online retailer. So when you look at this remaining 70% Of customers which are not cannibalized, who do you get them from?
So I mean, Victoria, I think that really the market is growing. And I think that almost all of the market growth It's coming through the online sector. So really the market is coming from what would have traditionally have been an ease out market. And we're just winning disproportionately. So I think that anyone with a strong online business, whether that be Ocado or Sainsbury are seeing dramatic increases.
It's just that Tesco, Because of its coverage, because of its size of its business to start with, because of the speed with which it was able to scale up And has just won disproportionately in terms of volume. So I'd say it's less about taking share and more about Winning disproportionately the increase in share available. Understood.
Thank you very much.
Ken, shall I pick up a question on operating leverage or are you going to?
Yes, please, Alan. Great, thanks.
Hi, Victoria. Happy New Year. In terms of operating leverage, yes, we clearly see it. Our COVID costs, as you've seen, have gone up from what we estimated in Early October at around €725,000,000 We're now estimating €810,000,000 So that's an €85,000,000 Increase. Against that, we're holding our expectations for the year.
So we've seen some clear leverage. We spoke about the improvements And how we see the online business improving. Booker went backwards because of the in terms of our outlook and from where we last were to where we are now because of the shifts in the catering market. So there are pluses and minuses, But clearly, we see operating leverage through what we're doing, and we'll continue to focus on that.
Thank you very much.
Thank you, Victoria.
Thank you. Our next question comes from the line of Rob Joyce of Goldman Sachs. Please go ahead. Your line is open.
Thank you. Good morning. Happy New Year. 3 from me. Just a follow on from that one, Alan, actually.
I mean, I think we're estimating Booker is a sort of €100,000,000 to maybe even €150,000,000 profit headwind this year versus last year. Is that the right way to think about that just so we can understand the difference in performance versus competitors perhaps? Second one, appreciate it's pretty early and a lot of unknowns. But as things stand, if you're looking into next year, FY 2022, do you think it's reasonable to assume you can grow profits from the base you're guiding to for this year? And then the third one is just Haven't talked about Brexit yet, but I guess a lot of seeing a few more reports of disruption in the ports.
Are you seeing any disruption to your supply chain and any early impacts on prices as a result. Thank you very much.
Thanks, Rob. Ken, shall I take the first one and maybe second and then you pick up the Brexit or how do you want to deal
with it? Yes. That works, Alan. That's perfect. Okay.
Great. Thanks. In terms of Booker, Rob, as we've said and as you know, the Cajun part of the business Is the more profitable within the Booker's mix. And that's something which therefore does impact Booker Proportionately in terms of profit and the if you like the leverage within Booker It's particularly felt when catering sales go backwards. So the way you're thinking about it is absolutely right.
Clearly, as the expectation and the hope is that the eating up markets recovers next year and we would all hope that it's better from a customer perspective than it's been over the last 12 months. In that sense, there should be some upside in terms of Booker and its ability to recover profitability. In terms of next year, really, I think it's Too early to talk about next year. We will give the best possible view as we get to the year end. We're off A period of uncertainty and clearly as we've seen, sales give leverage, operating leverage, but we see great opportunity, but really don't want to be At this stage, given the fact that we're still 6 weeks away from the proposal this year, I don't really want to be drawn into next year, but the moving parts, I'm sure, are as you understand them.
Ken, over to you for the Brexit.
Yes. Hi. Thanks, Alan. So Rob, in terms of Brexit, we have definitely seen Some levels of disruption. What I can tell you though is that because of the planning the team has done and because of the Supply chain preparation investment in stock, etcetera.
We weathered the storm incredibly well. And while we are seeing in some limited areas continued issues, Overall, our supply into the Northern Irish and to the Republic of Ireland and indeed into the mainland Great Britain, it remains very strong. And we're working very closely with governments on both sides of the IRC to Kind of iron out any residual issues in terms of the movement of goods, processes, Paperwork, documentation, etcetera. But we're as well set up as we can be And that we're maintaining good levels of service into our markets.
Thanks, Ken. And just to follow-up, I mean, early doors, do you think there's going to be much of an inflationary or even disinflationary impact And from the changeover?
We think it will be very small. So we're not planning any price increases into our business in the coming weeks months as a consequence of Brexit. We're obviously going to keep a very close eye on it. But at this stage, given that the agreement does effectively provide for largely for tariff free movement of product. We are confident that the costs will be minimal.
Thanks very much.
Thank you.
Thank you. And our next question comes from the line of Maria Laura Adorno of Morgan Stanley. Please go ahead. Your line is open.
Thank you very much for taking my questions. I just have 2. To the first one, I was just wondering if you could potentially provide us some level of detail with respect to everyday low price strategy and how much penetration you have From a customer basket standpoint, so that would be question number 1. And question number 2, just wondering given that this Christmas basic understanding is that it was heavily online grocery led. So from that standpoint, given the scale, given the potential loss of product Mix improving into that into Christmas.
Would it be fair to assume that also the underlying profitability would have increased? And thank you very much.
Thanks very much, Maria Laurie. So Specifically online or EDLP penetration, we don't disclose. I think And also it moves by period. But what we can tell you is that we have maintained our level a number of Products that are participating in the ALDI price match and in fact we increased it in the period leading up to the Christmas trading period. And we've seen as I as was mentioned In the trading statement, we've seen a 4 50 basis point improvement in our value perception as a business since we launched The campaign.
So really, I think the message is that This is something that's working for us as a business. It's something that we will continue to in terms of maintaining a very competitive price positioning, particularly as we head into economically uncertain times. And we will also continue to use the Clubcard pricing mechanism to offer our most loyal customers even better value. In terms of the underlying profitability of the period, clearly, You're right that the mix effect is a positive one in some regards, but It goes the other way in other regards. So yes, you see a trade up over Christmas.
And as we mentioned, we saw a 14% increase in participation in our finest ranges. But equally, of course, you've seen a much higher level Penetration in beer, wine, spirits and confectionery, etcetera, which is margin dilutive. So they tend to a certain extent, Maria, to And of course, you're also anniversarying a previous Christmas where you would have seen a similar mix effect. We wouldn't say that there's been a dramatic change year on year on our kind of our margin mix.
If I could just add to the first question in terms of everyday low pricing, Marie Laura, the promotional participation is down year on year And we're very clear on that. And we view it that also as being down relative to the market as well in the period. So we feel that it's working, but as Ken says, we don't disclose the numbers.
Thank you very much.
Thanks, Maria.
Thank you. And your next question comes from the line of James Grisnick Jefferies. Please go ahead. Your line is open.
Yes. Good morning. Happy New Year. I just have a very factual and brief one really. Would you mind detailing the rates of absenteeism you're seeing in the business now and perhaps where they were in November And where do we are in lockdown 1.0, please?
The rate of absence? Yes. So Yes. So look, the 1st lockdown, I think you'll remember, and we flagged it at the half year that we at one stage had over 50,000 colleagues Out of the business during the 1st lockdown. So I think that really is the starting position.
And clearly then as The rates of infection eased and the lockdown restrictions eased, etcetera, we saw the absence rates come right down through The second half of the year and into quarter 3. In the recent weeks, we have Clearly seen a spike in absence and we're now operating at about a 10% rate of absence, which is circa 30,000 colleagues. So lower than the first spike, But materially higher than the rate of absence we had during the second and third quarters before we got into Christmas trading. Thank you. Thank you.
Thank you. Our next question comes from the line of Xavier LeMen of Bank of America. Please go ahead. Your line is open.
Yes, good morning. Thank you for taking my question. I'm happy to hear to you. 2, if I may. Just First one, just on the price positioning and a bit back to Maja's question, but you stated that you've never been as strong as But can you share some data on how you compare potentially with your key competitors?
What is the kind of price gap you're seeing there? And then just on the Performer and the like for like performance more specifically, can you just give us a bit of comment on volumes, inflation and you talked about the mix already that Volume and inflation could be helpful. Thank you.
Alan, do you want to take Volume and inflation 1, and then I will come back on the price position.
Okay. Yes, certainly in terms of Great questions, Javier. In terms of the so whether you look at it at value or look at it volume, We're really comfortable in terms of the growth that we're seeing against it. You know that we won't go into specific Category by category, but as we look at it, we really are we're really encouraged by what we're seeing both at the volume and at the value end of it. If you want to ask any more, then I'll see if I can help you on it.
In terms of price positioning, as I mean, we look Really at customer perception on that because clearly it's really difficult across all our products To kind of give an exact like for like message because the discounters carry so much own brand with different pack size configurations, etcetera. But what we can tell you is clearly, we are now effectively matching Aldi against Thousands of products and we're maintaining that position. So we think that puts us In a really strong position, particularly relative to the other major multiples. We don't talk about specific price gaps, but we think we're materially better value Then certainly the large full range retailers.
So that's historic relativity. We're very comfortable with that historic relativity we've spoken about in the past as against Each of the other players in the market have you.
Right. And just if I may, just on the inflation, would you say that you were in Differential territories or inflationary territories in Q3 Christmas period?
There was still Flight inflation,
I think it was somewhat lower than previously, but it's still pretty muted in terms of inflation generally is what we see on the input side.
Okay. Thank you.
Thank you. Our final question comes from the line of Tom Davies of Berenberg. Please go ahead. Your line is open.
Good morning, guys. Happy New Year. I guess two questions from me. Firstly, in Europe, Can you quantify whether there was like a top line drag from the Hungary retail sales tax on like for like? And secondly, given you have this roadmap to Equivalence with the online and offline channels.
And some of your peers have been commenting that the increased volumes for the online channels improved the profitability of that.
Do you think there'll be
a change in behavior with regards to the growth of online channel versus pre COVID perceptions?
Thanks, Tom. So yes, we have had a drag from the sales tax in Hungary. And We have seen that the market wide issue as you know the majority of retailers in Hungary are foreign Multiple retailers and so it's a sales tax that's affected pretty much north of 80% of the market. And we have seen an impact because it is to a certain extent constraining volume growth because it has driven price increases. But actually more materially have been the variety of restrictions that Hungary has put in place to try and contain their rate of infection over quarter 3, which have varied From curfews at 7 p.
M. To an older age group restriction of Only then being allowed to shop between 9 and 11 in the morning, etcetera, etcetera. So it's been It has been a tough time for our teams in Central Europe in terms of responding to all the changes and restrictions that have been happening. So without a doubt, it has been a drag. In terms of the increase in volume online, the impact on profitability And the longer term trends.
We absolutely are seeing the same trend. So we are seeing that The increase in volume is improving the efficiency of the overall picking process. We are seeing improvements in van rate utilization. And as a consequence and because the basket sizes are larger, We are seeing an improvement in profitability year on year. In addition to that, we definitely believe And I think we alluded to it when we talked about the uptick in participation in the Delivery Saver option Is that we do think that a proportion of these sales will institutionalize as online sales.
And we do think it represents an inflection point in adoption of digital shopping in the grocery market. And we think that this trend is only going to continue, particularly As customers find it easy and convenient to do and they become very familiar with it. So really Our focus as a team and as a business will be in the constant improvement of the efficiency and profitability of this channel, improving the customer experience, opening up new shopping missions to customers through the digital channel and just increasing the level of sophistication and personalization of the digital channel for our customers.
Great. Thanks a lot.
Thanks, Tom.
Thank you. I'll now hand back to Ken Murphy for closing remarks.
Thank you very much, Tracy. So really all I wanted to do by concluding was Just to reiterate, what a strong performance I believe this represents for the business. And just to reiterate my thanks To our team, who I think have done a magnificent job in incredibly challenging circumstances, who continue to show up every day to look after customers under kind of a lot of pressure, really make me very humble and very proud to be part of this team. And really this performance is a reflection of their efforts, and I feel really proud of them. I think the last thing to say is really that Tesco believes it is in a very strong position To cope with whatever the market throws at us over the coming months and years because I think we are heading into very uncertain times, But I feel that we're really well positioned to cope with this.
And so I'd just like to finish by thanking you all Thank you for your time and for your questions and interest in the business today and some really great questions. And I look forward to speaking to you all again in the near future. Thank you.
Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.