Aldi UK, the British arm of the German discount supermarket, said its sales increased around 10% to almost £1 billion (€1.1 billion) in December, driven by increased demand for its premium ranges.
The firm, the UK's fifth biggest grocery chain, also said on Monday its sales increased 10% in the Christmas week beginning 17 December 2018.
Aldi, along with rival German discounter Lidl, has been winning UK market share from Britain's big four grocers - market leader Tesco, Sainsbury's, Asda and Morrisons.
Aldi has more than doubled its UK market share since 2010 to 7.6%, according to industry data.
Having built its business as a discounter, Aldi said its festive sales performance reflected a surge in demand for its premium ranges -- Specially Selected and Exquisite.
"Although we saw strong growth across all key categories, the standout performance was in our Specially Selected brand where shoppers treated themselves to premium products for a fraction of the price they would have paid elsewhere for similar quality products," said Aldi Chief Executive Giles Hurley.
The march of the discounters has forced the big four to reassess their own strategies. They have cut their own prices to better compete, while Sainsbury's has proposed a £7.3 billion (€8.1 billion) takeover of Walmart owned Asda - a deal currently being probed by the competition regulator.
Morrisons, the number four player, said on Monday it would cut prices on 935 products, including tinned tomatoes and cereals, by an average of 20%.
Aldi's growth is also being driven by its aggressive store opening programme. The firm opened over 65 new stores during 2018, increasing its total estate to 827. It said it remains on course to achieve a long-term target of 1,200 UK stores by the end of 2025.
"We begin the new year with great momentum as the UK's fastest-growing supermarket and on the back of record Christmas sales," said Hurley.
Aldi has said its like-for-like sales, which strips out the impact of new space, were positive throughout 2018 though it does not disclose the actual figure.
It maintains like-for-like sales is not a key performance indicator for the business as it is deliberately opening stores to take away, or "cannibalise", sales from existing ones that are too busy, often with all tills open and the car park full at key periods.
Morrisons has reported 12 straight quarters of underlying sales growth, driven by its wholesale business. However, analysts have forecast a slowdown in growth over the key Christmas period.
The chain is due to update on trading on Tuesday, followed by Sainsbury's on Wednesday and Tesco on Thursday. Industry data will also be published on Tuesday.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.