Like-for-like sales increased 5.7 per cent in the seven weeks to January 7.
Seymour Pierce analyst Richard Ratner said of the trading update: 'Good news, above market consensus, albeit not quite as good as the 6 per cent that we optimistically hoped it might achieve. Still well in the forefront of UK food retailing and, in our view, the best bet among the large stocks in either the general or food retailers.'
The supermarket said its Finest range sold well and Tesco.com had another record year over the Christmas period, notching up a record 1 million orders in the four weeks before Christmas.
Tesco said: 'The commitment and hard work of our staff once again delivered our best-ever Christmas for customers. Our customer service and product availability were strong and one-stop shopping for food and non-food at our 117 Extra stores was particularly popular.'
It said sales of home entertainment, electronics, clothing, toys and gifts also performed strongly. The Tesco overseas business also traded well over the period, with international sales up 16.1 per cent.
The group added that while deflation of in-store prices of 1.5 per cent remained roughly the same as in the third quarter, the UK overall moved from a price inflation of 0.5 per cent to a deflation of 0.5 per cent because of the impact of higher petrol prices.
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