Tesco defies retail gloom with surging £1.3bn profits

(c) Sky News 2018: <a href="http://news.sky.com/story/tesco-defies-retail-gloom-with-surging-16313bn-profits-11326065">Tesco defies retail gloom with surging £1.3bn profits</a>
 

Tesco (Frankfurt: 852647 - news) has reported a sharp rise in annual profits to £1.3bn after a year of "strong progress" despite tough retail conditions.

Pre (Shanghai: 600048.SS - news) -tax profits at Britain's biggest supermarket were 770% higher than the £145m bottom line figure it reported the year before when it was hit with big one-off costs.

The latest results, covering the year to 24 February, were buoyed by accelerating sales growth.

Like-for-like sales were up 2.2% across the year, with a strong performance from food - but a decline for general merchandise as Tesco slimmed down the number of ranges it sells.

Stripping out one-off costs, Britain's biggest retailer's underlying profits increased by 28% to £1.64bn, while revenues lifted 1.3% to £57.5bn.

Like-for-like sales were up across all formats and grew by 2.7% at walk-in convenience stores and by 1.9% at the retailer's larger outlets, while online sales rose by 5.1%.

Tesco said market conditions "remained challenging" with continued cost price inflation.

But the chain said it was working hard with suppliers to limit rising prices for shoppers - a consequence of the weaker pound since the Brexit vote raising import costs.

The company's shares rose by nearly 4% after Wednesday's full-year results, and closed the day up by 7%.

The group also announced its first end of year dividend since 2014, with a final payout of 2p, taking the full-year payment for shareholders to 3p.

Chief (Taiwan OTC: 3345.TWO - news) executive Dave Lewis said the group was on track to deliver at least £200m of annual cost savings after sealing its takeover of wholesaler Booker.

"This has been another year of strong progress, with the ninth consecutive quarter of growth," he said.

"We have further improved profitability, with group operating margin reaching 3% in the second half.

"We are generating significant levels of cash and net debt is down by almost £6bn over the last three years.

"All of this puts us firmly on track to deliver our medium-term ambitions and create long-term value for every stakeholder in Tesco.

"I am delighted to have completed our merger with Booker, and we are moving quickly to deliver synergies and access new growth, making the most of the complementary skills in our combined business."

The supermarket completed its £3.7bn tie-up with Booker, which supplies many of Tesco's competitors, in March.