Tesco named the Christmas winner as UK grocery inflation returns - Kantar

LONDON (Reuters) - Britain's biggest supermarket chain Tesco (TSCO.L) recorded the fastest growing sales of the country's four largest players in the Christmas quarter, as inflation returned to the grocery market after more than two years of falling prices.

Market researcher Kantar Worldpanel said Tesco sales grew 1.3 percent during the 12 weeks to Jan. 1, outperforming no.2 chain Sainsbury's (SBRY.L), whose sales fell 0.1 percent, Asda (WMT.N), down 2.4 percent, and Morrisons (MRW.L), up 1.2 percent.

Kantar's data also showed that inflation returned to the market with underlying grocery prices rising 0.2 percentage points during the period, the first increase in prices since 2014.

Britain's overall inflation rate has begun to rise following the slump in the value of the pound caused by the Brexit vote last June, and it is expected to hit around 3 percent this year.

"The long-anticipated return to inflation suggests that the speed of growth in the overall market will continue to hasten in 2017, and both consumers and retailers will be looking at ways to avoid increasing the cost of the weekly shop," Fraser McKevitt, head of retail and consumer insight at Kantar said.

Total supermarket sales in the period grew by 1.8 percent to 27.8 billion pounds, the fastest growth rate since June 2014, helped by bumper festive spending as consumers made the most of Christmas Eve falling on a Saturday.

The industry data was published after Morrisons, Britain's No. 4 supermarket group, earlier on Tuesday raised its profit guidance following its strongest underlying Christmas sales for seven years, confirming its recovery under new management.

(Reporting by Sarah Young; editing by Kate Holton)