Tesco Tops Forecast With Christmas Sales

Britain's biggest retailer, Tesco, beat analysts' average forecast on Tuesday with a 5.9% rise in underlying UK sales over the key Christmas period, driven by organic foods and its premium "Finest" range.

However, Finance Director Andrew Higginson also urged the Bank of England not to "over-apply the medicine" of raising interest rates, following a surprise increase in the cost of borrowing earlier this month.

"I'd be concerned that the Bank of England do not over-apply this medicine," he told Reuters in a telephone interview.

"The consumer has been cautious for the best part of a year, but has been prepared to spend up where they see value or where they want to treat themselves and they obviously decided they were going to have a good Christmas," he added.

Analysts had on average forecast a 5.6% rise in UK like-for-like sales excluding fuel for the six weeks to Jan. 6, within a range of 5.4% to 6.0%, according to a Reuters poll of seven investment banks and brokers.

Tesco has trounced rivals in recent years by expanding abroad and entering new product areas such as clothes and financial services. Its share of the British grocery market is over 30%, almost twice that of its nearest rival.

It said total sales were up 9.9% excluding fuel in the six-week period, with international sales up 15.8%.

Britain's retailers have experienced mixed fortunes over Christmas, as debt-laden shoppers face higher interest rates and rising household bills. Supermarkets, with their cost-conscious appeal, have fared better than most.

Britain's second-biggest grocer, Asda, said earlier this month it beat its own Christmas sales forecasts, without giving a figure, while number three Sainsbury reported a 5 % rise in UK like-for-like sales excluding fuel in the 12 weeks to Dec. 30. Number four Wm Morrison posted a 6.3% rise on the same basis in the six weeks to Jan. 7.

Tesco shares have performed broadly in line with UK listed rivals since the start of 2006. They closed at 419-3/4 pence on Monday, valuing the firm at 33 billion pounds.