Britain’s Tesco returns to annual net profit

LONDON: British retail king Tesco rebounded into annual net profit on strong sales and restructuring, the group said yesterday, as its recovery continued in the wake of a costly accounting scandal.

The supermarket giant revealed in a statement that earnings after taxation rebounded sharply to £1.2 billion ($1.7 billion, 1.4 billion euros) in its 2017/2018 financial year to February.

That contrasted with a net loss of £40 million in 2016/2017, when it was hurt by costs arising from the accounting fiasco. Excluding exceptional items, operating or underlying profit jumped 28 percent to £1.6 billion, broadly in line with company forecasts and after a major restructuring overseen by chief executive Dave Lewis.

The news, combined with confirmation of the first shareholder dividend since 2014, sent Tesco’s share price soaring to the top of the London stock market. Total sales grew three percent to £57.5 billion despite tough times in home market Britain, where high inflation has eroded consumers’ purchasing power as the Brexithit pound ramps up import costs.

Tesco-the world’s third-biggest supermarket chain after France’s Carrefour and global leader Wal-Mart of the United States-also has global operations dotted elsewhere including China, India, Ireland, Malaysia, Slovakia and Thailand.

‘Strong progress’

“This has been another year of strong progress, with the ninth consecutive quarter of growth,” said Lewis in yesterday’s results statement.

“More people are choosing to shop at Tesco and our brand is stronger, as customers recognise improvements in both quality and value.” Tesco, which completed its vast £3.7-billion takeover of British wholesaler Booker last month, added that it was on course to deliver at least £200 million of annual cost savings from the deal. Tesco has been dogged in recent years by an accounting scandal and fierce domestic competition from German discount chains Aldi and Lidl.

The group had slumped into a record loss of £5.7 billion in 2014/2015 on a vast property writedown and challenging home trade, before rebounding into slender profit in 2015/2016.

However, it then suffered a net loss of £40 million in 2016/2017, as the performance was skewed by a £235million hit in fines and costs arising from the accounting scandal.

Last month, Britain’s Serious Fraud Office decided that it would seek a retrial of three former Tesco executives, after a first hearing collapsed when one defendant suffered a heart attack. The three had all pleaded not guilty to fraud and false accounting after Tesco overstated profits in 2014.