Embattled U.K. supermarket chain Tesco (London Stock Exchange: TSCO-GB) reported that sales fell over the Christmas period and announced that it would not be paying a final dividend to shareholders this year.
Like-for-like sales, excluding fuel, fell 2.9 percent in the 19 weeks to January 3, and dipped 0.3 percent for the six-week Christmas period, it said in a trading statement on Thursday. Tesco also announced that it would not be paying a final dividend for the 2014/2015 period, in a move likely to disappoint its shareholders.
The sales figures mark an improvement from a 5.4-percent fall in its second quarter, and Tesco stressed that its online shopping, fresh food and general merchandise sectors had performed well in its home market during the holiday period.
Pradeep Pratti, an analyst at Citi, had predicted sales down around 3.5 percent over the Christmas period, compared with the previous year .
"A broad-based improvement has built gradually through the third quarter, leading to a strong Christmas trading performance," CEO Dave Lewis said in Thursday's statement.
"We have some very difficult changes to make. I am very conscious that the consequences of these changes are significant for all stakeholders in our business but we are facing the reality of the situation. "
The company also announced a new CEO for its U.K. and Ireland business, a restructuring of store management and the closure of 43 "unprofitable" stores. It hopes to deliver savings of around £250 million ($373 million) for the year, it said.
Shares of Tesco had risen around 13 percent by early afternoon trade on Thursday.
Rahul Sharma, retail analyst and founder of Neev Capital, called the results "fairly encouraging," but refrained from saying they marked a turnaround for the supermarket chain.
"U.K. consumers have a habit of treating themselves at Christmas. So you can't necessarily call this improvement a trend," he told CNBC Thursday.
Tesco has lost its way in terms of pricing, he said, but added that if it began to sell the right kinds of goods at the right prices, it could get back on course.
Bryan Roberts, director of retail insights at Kantar Retail, said there were some real "bright spots" in the results, as tough decisions were made.
"A long way to go, but Dave Lewis is pulling the business in the right direction," he said in a note after the release.
The grocer also announced overnight that it was cutting the prices on "hundreds of branded products." Tesco (London Stock Exchange: TSCO-GB) said it was in response to demands from customers for "simpler, lower and more stable prices", but also comes at a time of weak global price growth, with data published Wednesday revealing that the euro zone has slid into deflation.