Tesco boss cheers biggest profits in a decade

TESCO raked in its highest annual profits in more than a decade as it said consumer spending power was bouncing back.

Britain’s largest supermarket chain said profits rose 160pc to £2.3bn in the year to February 24 – its biggest haul since 2012.

This came on the back of a 7.4pc lift in sales to £61.5bn as it thrived in the face of hot competition from Aldi, Lidl, Sainsbury’s and a resurgent Marks & Spencer.

The figures were enough for it to spend £70m on a ‘thank-you bonus’ of about £300 to each of its 220,000 full-time staff.

And shares rose 3.3pc, or 9.5p, to 297p after it promised investors £1bn over the next year through a share buyback.

Tesco chief executive Ken Murphy said: ‘There is loads of uncertainty out there but I see gentle improvement in customer sentiment and our business is in really good shape, so I’m feeling quite positive.’

He warned inflation was still ‘quite sticky’ for some products including cocoa, coffee and potatoes while the price of oil was ‘creeping up’.

But Tesco will continue to slash prices in a boost to shoppers who have seen food inflation fall to 5pc after hitting a 19.2pc peak in March last year.

The profits led to profiteering claims from the Unite union, which said Tesco made ‘mountains of cash while families struggle to put food on the table because of sky-high prices’.

But Murphy said he ‘worked hard’ to cut prices on more than 4,000 products by an average of 12pc. ‘Customers are choosing to shop more at Tesco,’ he said.

Murphy said that he was not complacent about the supermarket’s rivals, adding: ‘We see threats from all sorts of angles, and we’re constantly on guard to be the most competitive we can be.’

Russ Mould, investment director at AJ Bell, said lower prices helped Tesco ‘maintain appeal to a large number of shoppers and retain their loyalty’.

Its own-label ‘Tesco Finest’ premium range has poached shoppers from upmarket competitors such as Ocado and Waitrose. Murphy called for a reform of ‘unfair’ business rates and inefficient apprenticeship levy, throwing down the gauntlet for both major parties to pledge overhauls ahead of an autumn election.

In particular, he said business rates, which are charged on commercial property including shops, were a ‘fundamentally unfair model’.

‘It doesn’t really work as it has penalised brick-and-mortar retailers now very heavily for the last ten years,’ Murphy said.

Reforming stringent apprenticeship levy rules should also be high on the agenda, Murphy said, adding: ‘Despite best intentions, I don’t think it’s delivering.’