Tesco (TSCO.L) said it was the only major grocer to increase its UK market share compared with pre-pandemic levels, with sales up 7.2% over Christmas.
The UK's biggest retailer said it took business from premium grocers, with like-for-like sales rising 4.3% in its third quarter to 26 November and up 7.2% in the six weeks to 7 January.
The retailer said this growth included “particular strength” in fresh food, with 8.1% growth, as shoppers continued to spend on essentials amid pressure on household budgets.
Group sales, which also include operations in Ireland, central Europe and the Booker wholesale business, grew 7.9% over Christmas and 5.7% in the third quarter.
Ken Murphy, chief executive, said Tesco delivered a strong market share performance in the UK and Ireland but warned of challenging conditions ahead as the cost of living forces shoppers to watch the pennies and pounds at the till.
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“I’m extremely proud of the way Tesco has stepped forward to help customers dealing with tough times this Christmas.
“By delivering relentlessly on the strategic priorities that we set out 18 months ago, we have made sure that customers know that they will benefit from great value and quality in every part of their basket, however they choose to shop with us.”
The supermarket said it had seen customers switching to Tesco around December as it froze prices of hundreds of products.
Tesco pointed to its Aldi Price Match, which pegs 600 key products to prices at its discount rival, and Clubcard Prices which helped customers spend less on festive products.
Sales volumes on Tesco’s Low Everyday Prices range jumped by 7.4%, as customers looked for cheaper goods
Sophie Lund-Yates, Lead Equity analyst at Hargreaves Lansdown, said there was an “elephant in the room”.
“A large proportion of success is coming down to discounting. Things like Aldi Price Match and price freezes are very successful tactics, but can spell bad news for margins. Supermarkets had only recently rediscovered their footing before the pandemic, following years of margin degradation from an all-out price war,” she added.
The supermarket group said it continued to expect adjusted operating profit from its retail activities of between £2.4bn and £2.5bn for the full year, with another £120m-£160m coming from its financial services unit.
Watch: Big retailers report Christmas progress as Tesco claims win over premium grocers