ESM examines five key takeaways from the media call.
1. 'Cautiously Optimistic'
When questioned about the broader macro outlook for the coming year, Murphy described himself as 'cautiously optimistic" coming into 2024, pointing to interest rates stabilising and mortgage rates starting to fall, along with food inflation improving.
"We have also seen deflation in fuel prices and then you balance that with strong growth in wage rates, you get the sense that things are balancing out for consumers," said Murphy. "As long as we are in a full employment market, I feel like we are in a period of relative stability."
2. Tesco Finest Performs Strongly
The Tesco Finest private-label range was a big winner in 2023, particularly over the festive period, and the retailer is seeking to continue that momentum into this year.
Murphy noted that Tesco invested in over 550 new and improved festive SKUs, almost a third of which were part of the Tesco Finest range, including the launch of the Tesco Finest Chefs Collection, which features restaurant-quality products designed by Tesco's expert chef.
"It was a record Christmas for Tesco Finest with sales up 17%, with more than 18 million customers buying from the Finest range over the period," said Murphy. "We continue to win with customers from premium retailers, as we have done now for 17 consecutive periods."
3. A Reason To Celebrate
Despite inflation, an energy crisis, and an uncertain economy, it would appear many consumers just wanted to enjoy a traditional, celebratory Christmas in 2023. Food was obviously a big part of this, with Tesco selling over a million turkeys, crowns and joints, and more than 57 million mince pies.
“We saw some really fantastic trends across the board,” Murphy said of the retailer’s festive food sales. “You did see very strong demand for for wines and Proseccos, and so forth, because I think family gatherings, bigger gatherings and celebrations were definitely much more a feature of this Christmas.
“You saw people trading up this Christmas. There was definitely a mood of ‘let's celebrate’. Let's celebrate with the best quality product. Let's have some fun and be good to ourselves over Christmas after a reasonably tough year.”
4. Supply Chain Concerns
The world’s biggest retailers haven’t been immune to the current difficulties with ships passing through the Red Sea. Murphy claimed that Tesco is projecting a minimal impact from the current situation on its business – non-food accounts for about 7% of its sales – but will be keeping a close watch.
"First of all, the relative quantum impact on us, in terms of what gets shipped through that channel relative to others is lower. said Murphy. “We don't have as much product coming through the channel as other people do. And then, we have alternative sources of supply if we need it."
However, he did acknowledge that ships having to travel around the Africa and the Cape of Good Hope would inevitably lead to supply chain costs rising on some products.
"If they have to go the whole way around Africa to get to Europe, it extends shipping times, it constrains shipping space and it drives up shipping costs," said Murphy. "So that could drive inflation on some items, but we just don't know and we don't know how long this will last."
5. Winning On Price
Murphy made no secret of the fact that he wants Tesco to win the war on price, noting that this past Christmas, the retailer offered a full festive dinner for just over £2 per head. It also lowered the price of nearly 2,700 products by an average of around 10% during the 19 week period.
"Our commitment to be the cheapest full-line grocer in the country is absolutely resolute," he commented. "That is what we are all about. We have been that way for 14 months and my commitment will to continue for the foreseeable future.
"You have seen throughout the year, a shift from negative volume to positive volume growth, as we moved from the first half into the second half of the year, and that was maintained throughout the Christmas period."