Tesco Reports 14.1% Rise in H1 Profits

Leahy: “The global economic headwinds of the last two years are being replaced by the tailwinds of recovery in most of our markets and this is helping our International businesses to resume strong sales and profit momentum."

Oct 5 2010 --- Tesco has reported that group sales, including VAT, increased by 8.3% to £32.9bn. At constant exchange rates, sales increased by 6.4% (including petrol) and 5.5% (excluding petrol).

Group trading profit was £1,692m, up 9.1% on the first half last year and Group trading margin, at 5.6%, rose 10 basis points. Underlying profit before tax rose to £1,792m, an increase of 14.1%. On a statutory basis Group operating profit rose by 9.1% to £1,747m. Group profit before tax increased 12.5% to £1,596m. Underlying profit for the first half excludes restructuring costs relating to our activities in Japan and the United States, the closure of our Vin Plus store in France and a further £55m goodwill impairment for our business in Japan.

In all regions Tesco saw an improved trading performance in quarter two compared with quarter one. Group sales increased by 8.8%, driven by all parts of the company´s strategy. Total International sales increased by 16.8% at actual exchange rates (10.9% at constant exchange rates) and total UK sales grew by 5.3%, including VAT and petrol.

The sales performance in Asia was encouraging, with 27.7% growth (12.4% at constant exchange rates), helped by stronger trends across the region, with particularly pleasing growth in Korea and Thailand. In Europe, sales grew by 5.8% (8.6% at constant exchange rates), with economies now generally in recovery. Ireland’s sales turnaround continued and Poland performed well.

Overall International like-for-like sales growth was 4.1% in the second quarter (compared with flat in the first quarter) with 5.0% growth in Asia and 3.1% growth in Europe. In the United States, sales were up 58.0% (44.9% at constant exchange rates), with strong like-for-like sales at 12.2% - driven primarily by increased customer numbers.

The UK business performed solidly, growing faster than the industry as a whole. Whilst overall like-for-like sales growth including petrol was 2.4% in the quarter, higher fuel costs meant that customers have had to shift some of their spending to petrol at the expense of their normal shopping. This, combined with low food inflation resulting from unusually high levels in the first half last year constrained industry growth.  Although customers in the UK face some uncertainties, Tesco said that they continue to see evidence of a steady consumer recovery.

 Terry Leahy, Chief Executive, comments: “The global economic headwinds of the last two years are being replaced by the tailwinds of recovery in most of our markets and this is helping our International businesses to resume strong sales and profit momentum. Our  important Asian markets in particular are emerging strongly from recession and we are now benefiting from the substantial investment we continued to commit to the region during the downturn.

“In the UK, we have coped very well with subdued demand and modest levels of industry like-for-like growth, helped by excellent productivity, a pleasing performance from new stores and good growth from our Services businesses,  particularly online and Tesco Bank. Economic recovery in the UK is slow and steady and I believe our investment in  making the shopping trip even better for customers means that Tesco is well-placed to grow in this environment.”