CEO Dave Lewis' strategy implementation is yielding results - 2017 saw strongest Christmas sales since former head Leahy's departure in 2010 - however the negative reaction stems from United Kingdom like-for-like sales during the key period coming in at 1.9%, well shy of 2.8% consensus, weaker than even the lowest estimate of 2.0%.
In addition, Tesco's online grocery business contributed sales growth of five per cent, with over four million customer orders in the six-week Christmas period.
Tesco's UK LFL sales growth of 1.9% was driven by a 3.4% rise in food.
"Our trading momentum accelerated across the third quarter and into December, with the four weeks leading up to Christmas Day delivering record sales and volumes in the United Kingdom".
Tesco's chief executive, Dave Lewis, added that Tesco was "firmly on track to deliver our medium-term ambitions".
In the four weeks before Christmas Day Tesco enjoyed "record sales and volumes" and in the first week of December Tesco reported its biggest ever week of sales, outstripping the market by almost four per cent in fresh food.
But Tesco said it is working with suppliers to mitigate inflation and Mr Lewis said consumers are still "cautious" about how they are spending their money. The results come after the latest Kantar data showed that the company was the fastest growing of the UK's big four supermarkets in the 12 weeks to December 31, while still growing behind the market.
However, when taking all of the Big 4 retailer's worldwide markets into account, total like-for-like sales grew by 0.6 per cent during that period, but overall sales enjoyed a 1.8 per cent uplift.
Supermarket Morrisons also had promising financial results.
The M&S boss said that despite the sales dip, he believed the retailer was right to resist the Black Friday discounting frenzy as it focused on restoring its price positioning.