Shares in supermarket giant Tesco rose 2% after the retailer revealed its strongest sales growth in three years.
The firm has been attempting to reverse a profits slide in recent months, and positive trading over the Christmas and New Year period cheered investors.
Like-for-like sales in the UK which strip out the effect of new store openings were ahead 1.8% in the six weeks to January 5 compared with the previous year.
Total sales, including VAT and petrol, grew 4.2% in the period.
The company said its performance in Britain had been underpinned by “much stronger” demand for food than was the case during a difficult trading period over Christmas 2011, in which Tesco said it had made mistakes an admission that wiped billions off the stock market value last year.
The firm said the results for last year vindicated its six-part recovery plan for the UK business, which has a strong focus on its food offering especially fresh produce.
Its Everyday Value and Finest ranges had both outperformed the business as a whole.
General merchandise performance remained a drag on overall growth, despite progress having been made since the third quarter of the year.
However, clothing bucked the trend, with a further strong period during the festive season to add to growth in the previous two quarters.
Tesco said it had benefited from a “strong online performance”, with food sales up 18% and its Direct service which allows customers to order goods via a range of digital platforms growing by 16%.
Chief executive Philip Clarke said the seasonal performance was encouraging but there were still obstacles to be cleared as Tesco looked to recover from last year’s first drop in profits for two decades.
He said: “We are just nine months into the implementation of our six-part plan, which is about building a better Tesco in the UK for the long-term.
“Whilst our seasonal performance is encouraging, there is a lot more to do and the team is focused on delivering further improvements for customers in 2013.”
One swift move is the appointment of long-serving executive Chris Bush to the post of UK managing director, a role Mr Clarke has fulfilled on a temporary basis in recent months.
Richard Hunter of Hargreaves Lansdown said Tesco had pulled off a major turnaround.
“What a difference a year makes,” he said.
“Last January Tesco issued a profits warning which precipitated a 20% fall in the share price and questions being asked about the validity of the strategy.”
However, despite the UK sales improvement, Seymour Pierce analyst Kate Calvert said it was too early to say whether Tesco was truly back on track.
She said: “There is still much to be done, given general merchandise remains a drag, and we believe there will be no visibility on whether UK profits have bottomed until the second half of 2013.”
Shares closed up 6.3p to 355.4p.
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