The Courier & Advertiser (Fife Edition)
Tesco sales surge as turnaround gathers pace
SUPERMARKET: Dividend to be paid for the first time in three years
Supermarket giant Tesco reported a surge in half-year profits and rising sales as it hailed efforts to keep prices low amid Brexit-fuelled inflation.
The group said UK and Ireland underlying operating profits leapt 21.1% higher to £471 million in its first half after it notched up its seventh quarter in a row of rising sales.
UK like-for-like sales in the second quarter lifted 2.1%, although this was down slightly on the 2.3% recorded in the previous three months.
Chief executive Dave Lewis said the group was now “more competitive and more customers are shopping at Tesco” as it sought to keep prices low.
He added: “We are continuing to make strong progress. Sales are up, profits are up, cash generation continues to strengthen and net debt levels are less than half what they were when we started our turnaround three years ago.”
Sales rose from £27.3 billion to £28.3bn, while on a statutory basis, pretax profits rose from £71m to £562m.
Mr Lewis confirmed Tesco would resume paying a dividend after nearly three years, with a 1p-a-share interim payout.
“Today’s announcement that we are resuming our dividend reflects our confidence that we can build on our strong performance to date and in doing so, create long-term, sustainable value for all of our stakeholders,” the chief executive said.
The group has come under heavy fire in recent days over its own-brand chicken after it was discovered its supplier 2 Sisters had taken Lidl chicken and repackaged it under Tesco’s Willow Farm brand.
Mr Lewis said the group was as “shocked as anybody” by the undercover media investigation, but said it would keep the brand, which he insisted had a quality specification unique to Tesco.
Its supplier has agreed to shut the plant and retrain employees.
The chain said its inflation was around 1% less than that across the rest of the supermarket sector as it worked with suppliers to protect customers from inflationary pressures.
Sales of its own-label ranges rose 4.6% in the first half as customers looked for value in the face of rising prices from the weak pound. On a group-wide basis, underlying earnings rose 27.3% to £759m at actual exchange rates.
The results come as Tesco awaits the findings of an in-depth competition probe into its planned £3.7bn takeover of wholesale giant Booker, with provisional results due from the Competition and Markets Authority later this month and a final decision in December.