Good morning, everyone, and a happy New Year to you all. Imran is here with me and Wellen, as usual. First of all, I'll give a little color on our performance, and then we'll hand over to question and answers. I'm hoping you've had a chance to read the release, and so you'll have seen that customers responded really positively to our Christmas offer. In fact, the work we have done to invest in value, create high-quality products, deliver market-leading availability and customer service, has resulted in our best ever Christmas offer. We're delighted that so many customers voted with their feet and chose Tesco this Christmas, leading to a really strong performance. We've been relentless on value because we know just how important it is for everyone, and for over 14 months now, we've been the cheapest full-line grocer in the U.K. due to our investment in value.
This Christmas, we were proud to offer a full festive dinner for just over GBP 2 per head, including a fresh turkey. Those key festive lines are really important for customers, but so too is great value across the rest of the basket, and that's why we've lowered the price of nearly 2,700 products on average by about 10% during the 19-week period. This week, we've been helping customers manage their budgets for the new year, too, with another round of price cuts on more than 150 products and a double Clubcard points event. It's the first time we've run a double points event like this for more than a decade, and we expect to give out around 10 billion Clubcard points over the next seven weeks. Quality is also particularly key at Christmas as customers look to trade up and treat themselves.
We spend a lot of time on innovation and product development, and our new Finest range really stood out from the crowd as a result. We invested in over 550 new and improved products, almost a third of which were Finest, including the launch of Finest Chef's Collection, restaurant-quality products designed by our expert chefs. It was a record Christmas for Tesco Finest, with sales up 17% and with more than 18 million customers buying from our Finest range over the period. We continue to win customers from premium retailers, and we've done this now for 17 consecutive periods. In a return to tradition this year, it was all about the big Christmas shop for customers, and they really came out in force for our busiest day on the 22nd of December.
We invested more in colleague hours, and our colleagues really stepped up to serve a record number of customers on Christmas Eve, and we did nearly 820,000 transactions in just one hour. So I'm really proud of the products and the range we had this Christmas. But what really makes the biggest difference to our customers' experience is the service from our brilliant team of Tesco colleagues. It's been a proper team effort, and we've had some real heroes behind the scenes, working right across our business to make sure everything comes together, from the technology and online teams to product, supply chain.
A particular highlight for us was our Whoosh rapid delivery service, which delivered nearly half a million orders in the run-up to Christmas, which is pretty good going when you consider this is really, quite a new business for us. All of this great work has culminated in us delivering market share gains and continuing to win customers from our competitors. Booker has also had a really great Christmas, driven by our exceptional service and availability. In Ireland, we reached our highest levels of market share in almost a decade, with strong growth right across food, and we also opened our first store in Kilkenny, which now means there is a Tesco in every county in the Republic of Ireland. Our Central European business has delivered a really resilient performance against what continues to be a challenging backdrop.
In summary, we've got the right strategic priorities, and we're making really great progress on them, and we go into the new calendar year with great momentum. You'll have seen that we've upgraded our guidance for adjusted operating profit and cash for the current year as customers recognize the progress we are making. We've got the right plans and a great team delivering them. With that, we'd like to move on to your questions. Thank you.
Thank you. Ladies and gentlemen, if you would like to ask a question or make a contribution on today's call, please signal by pressing star one on your telephone keypad. That is star one for your question. And our first question today comes from Andrew Gwynn, from BNP Paribas. Please go ahead.
Hi, morning, team, and Happy New Year. Two questions, if I can. So, obviously, a very good Christmas. Well done to yourselves and the team. But, what's the setup feel like for the next financial year? Appreciate it's just a trading statement, but thoughts would be very welcome. And the second, just, into the detail, actually, and looking at the Best Food Logistics, obviously quite a soft sales performance, based on unprofitable sales. Just help us understand that a bit better. Is it something we should in the coming year? Thank you very much.
Morning, Andrew. Thank you very much. I think the key thing to take away from this trading update is that we have really great momentum in the business across every aspect of the business model. So we lead as the cheapest full-line grocer in the market. We've had a great uptick in our product innovation, with over 550 new products, one of the, you know, highest number of new products in the market, and a very strong growth, particularly in our trade up categories and Finest. We've invested very strongly in the store experience and the shopping trip. We continue to invest in our technology capability, and so we feel really good about our readiness for what, whatever 2024 brings. We think the consumer is in a cautiously optimistic mood. That said, it's a battle for every basket.
You know, we're in a highly competitive market with eleven strong national players, and so we continue to expect it to be a really competitive and tough environment, but we think we're really well-placed. In terms of Best Food, I'll hand over to Imran just to talk you through the factors there.
Look, I mean, Best Food Logistics, we called it out. As you know, originally, we acquired that business, to basically give us sort of core infrastructure for the, for the catering side of the business. The business gave us, at the time when we took it, GBP 1 billion of sales. It was in a loss-making position. Glad to say today, it's in a profitable place, which is great. But and also what we decided to do is, as you know, it's important to have contracts that make money. So we took the opportunity to prune out, basically, loss-making contracts, which, you know, will cycle through maybe another quarter or two, but then should be out of that, but feeling very good.
I think, as you can tell, you know, the growth in Booker catering has been phenomenal, especially over Christmas, and the Best Food Logistics was a bit of an offset there, but was actually not a big profit contributor.
Okay, all very clear. Just that, I suppose the key question will be markets, as far as you can see, is remaining very rational, competitive, but very rational.
Yeah. I mean, look, I think when you look at the market dynamics over the last, you know, since the half year, we spoke about how does it feel, and what you've seen is a very rational backdrop, you know. And I think as we look into next year, clearly, commodities will do what they will do, but all the industry players and frankly, the supply base will deal with the national wages increases as well. So I expect a continued rational market to persist.
Great. Thanks so much. Catch up soon.
Thank you, Andrew.
Thank you. Up next, we have Izabel Dobreva from Morgan Stanley. Please go ahead.
Hello, good morning. I have two questions, please. So firstly, a question on your guidance, which you have upgraded. So it still sounds like you are building an element of conservatism in there. So I just wanted to talk through your assumptions, for the back half and specifically, how you are thinking about price investments in the context of the recent price cuts and, price match schemes we have seen announced. Is that just a normal post-Christmas belt-tightening in your view, and how are you thinking about the competitive environment, when giving us that guidance? And my second question was on promotions and supplier income. What are you seeing here, and do you see further room for supplier-funded promotions to continue to grow over the next twelve months?
At what stage would you be concerned that this becomes disruptive to the overall price image?
Look, I mean, let me take the guidance question. I mean, look, as you say, look, you remember in half one, so four months ago, we upgraded for the first time after having a really strong first half. We delivered around GBP 1.4 billion. Now, three months later, we're upgrading a second time, where we're, you know, taking, as opposed to the GBP 2.6 billion-GBP 2.7 billion, we're saying GBP 2.75 billion. If you step back, given our size, that's broadly a 50/50 split. I feel really good about how we've gotten there, because we've gotten there by being the cheapest full-line grocer, by investing in colleagues, by investing in promotions and frankly, working with our suppliers. So the way we've gotten there is very, very solid. And stepping back, given our scale, that's broadly a 50/50 split.
Now, both ends of the halves have certain investments in. Clearly, we wanna continue as we head into next year, be front-footed with our status versus customers, and therefore we will continue to invest. As you've seen our Clubcard double points or our 150 price cuts, you know, that will continue to cement our position, and I feel good as we enter next year with that momentum. So I don't see it as conservative. I see it as a, broadly speaking, a 50/50 split, first half, second half, and that sets us up well to go into the next half. On the second question on promotions...
Isabelle, it's a really good question. It's something we watch very closely, because we are, quite protective of our price file and making sure that we, have as much simplicity and clarity as possible to be able to maintain, A, our level of everyday low pricing, 'cause that's a really important of our overall value proposition. And B, as you say, to kind of avoid this sense of back margin and, and lack of transparency. So that's a real key tenet. That said, inevitably, there has been a drift up across the industry over the last 12 months of volume on deal, and that really is a consequence of what you saw in the previous year, which was a really strong switching into own brand proposition.
Now what you're seeing is suppliers, branded suppliers trying to win share back through deeper deals and more frequent deals. And that, I think, is a feature of today's landscape and a reality, but we'll work really, really closely and strongly with them to make sure we kind of maintain that integrity of the price file.
Thank you very much.
... You. We're now moving on to Clive Black from Shore Capital Markets. Please, go ahead.
Oh, good morning, and thank you. I'm sure the people of Kilkenny are particularly happy this morning. Couple of questions, if I may. Firstly, given your comments, Imran, about the National Living Wage , I just wonder if you could give us your expectation for the continuation of food inflation into 2024. And in that respect, maybe just give us a little bit more color about the price volume mix that you've experienced over the last 19 weeks. And then just secondly, maybe give a little bit more color, too, as to some of the dynamics in Central Europe and your hopes and aspirations for that region as well. Thank you very much.
Okay, sure. So let me take them. On the food inflation side, as you know well, I mean, just Kantar reported, what was it, 6.5% or so in the last read. We're meaningfully below that and continue to inflate less than our competitors. That's something we'll continue to do. In our internal assumptions, you know, our perspective hasn't changed. We continue to expect this inflation trajectory that we're on to continue.
As I look ahead into next year, now, clearly, you know, commodities will do what they do, but I do think that, you know, we do expect to see some levels of inflation, albeit at a much lower level, to continue next year, driven by the fact that labor costs are a headwind, so to speak, for everyone, and have to be dealt with. Your second question was on Central Europe. Now, clearly, you know, it hasn't... In terms of the dynamics, you will remember we spoke about Hungary being especially challenged, and the way I'm looking at it is, you know, that is driven by government actions and by the very high levels of inflation. Clearly, we have invested more in Europe.
I think that is right, given the pressures that our customers are facing out there, when you think about 2-year inflation of over 30% or so. We will continue to invest. And you're right, you know, given that the environment is challenged, our focus was on protecting the market share, protecting the franchise. And I'm confident that as conditions sort of get back to normality, which we're starting to see, that the business will gain back onto growth, and we saw that already at Christmas.
Just some color on market share in Central Europe, please?
Look, I mean, I think it's we're starting to recover some of the from the discounters and from all the other players. So I think overall in a good place when I look at the amalgamation of the of the three countries, a special strength in Slovakia to call out, and the rest are are fairly broadly flat.
Thank you very much. Well done, guys.
Thanks, Clive.
Thank you. Up next, we have Sreedhar Mahamkali from UBS. Please go ahead.
Hi, good morning. Happy New Year to you all. Three, hopefully quick questions, please. Maybe just to build on Clive's point, how do you characterize volume growth through the year? You referred to volume, I think, in Q2, and now you're more vocal about it. And do you see this volume growth continuing to build? Imran, to your point about continued disinflation, does that spur on a bit more volume growth over the coming quarters? That's the first one. Secondly, it'll be super helpful if you could, at all, give some sort of color around the puts and takes in terms of profit growth for the year ahead. I think people are modeling GBP 50-60 million. Just talk us through your thoughts. And you've already referred to living wages in one of those.
Anything else we should keep in mind? Third one, any comments at all, I'm gonna try, but, on the bank process, that seems to be going on behind the scenes, to the extent you can share something with us. Thank you.
Thank you. Well, look, we'll take the last question first, which is a pretty short answer, is we never comment on any speculation in the market, and you wouldn't expect us to, I'm sure. In terms of volume, I think the shape of volume over the last 12 months has been trending from volume, kind of negative volumes through to positive volumes from the first half through to the second half, and that trend is just continuing and continues to strengthen. We can't really legislate for what will happen in the coming 12 months, but what we are planning for is modest volume growth in our assumptions.
In terms of profitability, I'll kick it off and maybe hand over to Imran to give you the kind of the main drivers, but clearly, we're expecting some headwinds from wages and some tailwinds from energy.
And look, I mean, clearly, we're gonna talk in April more as to how we see the year pan out. I mean, you know, just to give you a sense of how we think about it, we always go back to our framework on performance that we laid out, right? Every year is a fresh year, and our aim is to hold and grow market share, to translate that into profit growth, and then, frankly, deliver the cash so we can continue the returns that we have started. That's the philosophy we start every year, and every year is going to have its puts and takes, as you call them. And Ken is right. The big known known is going to be, there's going to be headwinds from energy. We do know that we're very confident in our... Sorry, from wages.
We know that we're going to have some benefits from energy, but still there's open positions still to be concluded there, so that's an ongoing program. And then clearly, you know, we know that we will continue to invest into the customer at the same time. And the aim is to continue to hold and win market share.
Thank you.
...you. As a brief reminder, that is star one to ask a question today. We're now moving on to Nick Coulter from Citi. Please go ahead.
Hi, good morning. Happy New Year. Three quick ones, if I may, please. Imran, I think you commented, but could you confirm you don't see deflation this year, please, as far as it's in your scope? And then a follow-up on promos, if I may please. Could you talk to where the branded is back into volume growth, or and if its growth is still lagging own label? Obviously, that's nuanced, given the tiers in own label are probably behaving quite differently over peak. And then lastly, could you talk to your non-food performance across peak, please, from a sales and profit perspective, if possible? Thank you.
Okay, so I'll start. I'll kick off on deflation, you're talking about the year ahead, right? 2024, 2025.
Yeah.
Look, I mean, the way I'm thinking about it, and then in a rational market with the headwinds on labor, my perspective is obviously commodities is always hard to call, is that we would be in a disinflation mode rather than in a deflation mode. So that's my current base assumption.
And would deflation trouble you, Imran, if that came into?
Look-
into Hugh, and would you view that as transitory?
Look, I mean, I think one thing that we've proven over the last three years, right? Whether it was during COVID, whether it was during cost of living, whether it was during supply chain, whether it was energy, we have learned to be agile and deal with these challenges or any challenges that are thrown at us. So look, our job is to be prepared for whatever scenario is thrown at us. Our current base case assumption is a disinflationary environment, but if it was anything different, then our job is to make sure that we continue to protect the value to our customers whilst making sure that, you know, we, we, at the same time, protect our, our PNL at the same time, right?
You know, one example that I would call out that demonstrates how we've been doing that is our successful Save to Invest program, and to save over GBP 1.1 billion in the last two years. You know, clearly, as we look ahead into next year, we will continue to look for savings and have an active Save to Invest program.
Thank you.
On non-food performance, look, we actually feel really good about our non-food performance. The first stat that matters most is probably to say that non-food for us is around 7-7.5% of the total business, so it's not significant. Now, as I look within that, we saw a slight step back on the total business around, call it 3% sales decline in total non-food. But if I exclude the actions that we've taken to prune out loss-making items such as electricals, we're actually in a broadly flat sales number, and that's no bad thing. So I'm actually quite pleased with the fact that we were so proactive to take our loss-making items and benefiting from that at this stage.
Okay, so flat sales, but with profits diluted, sales removed. Thank you.
Year from... Sorry, say that again?
The profit was up.
So-
Profit-
... flat underlying sales with profit-dilutive items removed.
Yes, correct.
A relatively healthy picture.
Yes, correct. And in fact, what that ended up doing is our profits year-on-year grew in non-food.
Thank you. And then on branded, please.
So, I mean, in terms of branded promotions or branded sales and performance overall?
Just whether branded is back in volume growth or if its growth is still lagging-
Yes, it is.
... own label.
It is.
I guess, are the promotions working to a degree?
Yeah. I mean, I think, as you'll have heard from the previous conversation, you've seen a meaningful uptick in volume on deal, and that has meant that you have seen volume growth in branded sales. And overall, we've seen actually a positive mix effect from switching into premium proposition. So Finest obviously grew much stronger than the total business, and you are seeing stronger growth in volume and branded sales this Christmas as well.
Okay. So the overall branded categories have moved into volume growth on the back of the promos?
Is that it? No.
Yeah, thank you very much.
Thank you.
Thank you. And we're now moving on to James Anstead from Barclays. Please go ahead.
Morning, Ken, Imran. Two questions for you. Firstly, one of your big competitors has said that while they'll always keep sharp on price, they feel the, the heavy lifting on price investments is largely done on their side. Given you sound quite pleased with where your relative pricing sits now, is that a sentiment you share with respect to your own business? Second one would just be... Sorry, it's a slightly technical one, but you quoted, like, the like-for-like of 9.2% in the four weeks to Christmas and 6.8% for the six week period overall. If I do the maths on a very simple basis, that seems to suggest that quite a dramatic slowdown in the two weeks after Christmas.
Is, is that the right way to think about it, or are there some timing issues that makes that math a bit meaningless?
... No, it's just, it's just a calendar effect, that's all. Not nothing, nothing else.
It's where New Year's Day fell effectively.
Correct, yeah. There was one trading day less in that. That's it.
Yeah. On your first point, I mean, clearly, we never comment on what competitors say. I think that our policy is that being super sharp on pricing is a fundamental tenet of being successful in this market. And given the competitive intensity in the market, we don't feel like you can relax or rest on your laurels from a pricing point of view. So we'll continue to invest in price, we'll continue to be very focused on value, and we look to lead the market amongst the full line grocers consistently as we have done over the last 14 months. So, you know, I don't think I've relaxed on value for a single day in the 3.5 years I've been in this business. I don't see that changing anytime soon.
I suppose to ask the question slightly differently. You've now got into this position of being the cheapest full-line grocer for 14 months. You know, are you keen to become not just the cheapest, but even more dramatically cheap, or is being the cheapest enough?
We've always made, and this goes back to Imran's earlier point about our framework, our kind of strategic framework, and holding and at least holding, maintaining, gaining market share, maintaining a rational market, are key components of our business model. And so we'll behave rationally, but I just wanted, I didn't want to mislead anybody by suggesting that the competitive intensity was somehow going to ease off.
Great, that's helpful. Thank you.
Thank you.
Thank you. If there are currently no further questions, I'd like to hand the call back over to you, Ken, for any additional or closing remarks.
Well, listen, thank you all again for all the questions and for taking the time to join us this morning. I hope you feel as we do, that this has been another strong performance by the team at Tesco, across all aspects of the business model. We feel really good about where we are right now and where we are set up going into 2024, and we look forward to seeing you all again in April, if not sooner. Thank you for your time. Take care.