Tesco Reports Disappointing Holiday Sales Amid Consumer Spending Cuts

Tesco PLC recorded a 2.3% decline in UK grocery sales during the December holiday period, marking its weakest seasonal performance in five years. The drop reflects broader consumer caution as households reduce discretionary spending.

Tesco's holiday sales fell short of expectations, with UK grocery transactions dropping 2.3% year-on-year in December 2025, according to internal company data. This decline marks the first negative growth in the key holiday quarter since 2020 and signals a shift in consumer behavior driven by persistent inflation and tighter household budgets. The company reported a 5.1% drop in non-food sales, particularly affecting seasonal categories like festive decorations, confectionery, and alcohol. The performance contrasts with a modest 0.8% increase in comparable sales across the broader UK grocery market, indicating Tesco is underperforming relative to competitors. Analysts attribute the shortfall to a combination of price sensitivity and reduced footfall, especially in lower-income regions. Online sales rose 4.2% during the period, but this growth was not sufficient to offset the decline in-store traffic and basket size. The results have prompted a reassessment of Tesco's strategic pricing and promotional plans for 2026. The company is now accelerating its rollout of low-cost private-label products and expanding discounts on core grocery items in response to ongoing cost-of-living pressures. These measures aim to stabilize customer retention amid a challenging macroeconomic backdrop. Investors reacted with caution, sending Tesco's share price down 1.7% in early trading. The stock has now underperformed the FTSE 100 by 4.3% year-to-date, reflecting growing concerns over retail sector resilience. Key competitors including Sainsbury's and Morrisons are also monitoring the trend closely as they prepare for their own holiday results later in January.