Tesco gets back on track with first rise in sales since 2010

● Hike in UK takings welcomed by City but group ‘not out of the woods just yet’

Tesco has rung up its first annual hike in UK sales for seven years but the supermarket giant’s bottom line took a hit over its 2014 accounting scandal.

City analysts said Britain’s biggest retailer was “staging a recovery” as it yesterday unveiled a 0.9 per cent rise in UK like-for-like sales in the year to 25 February, marking its first annual growth since 2010.

Underlying food sales in the UK were up 1.3 per cent.

Operating profits were up 30 per cent to £1.28 billion, while group sales increased 3.7 per cent to £55.9bn.

However, on a statutory basis, pre-tax profits slumped to £145 million from £202m after the group booked an exceptional £235m charge linked to payments to UK authorities over its accounting scandal three years ago.

Chief executive Dave Lewis, who has put the group back on a firmer footing in the face of fierce competition and food price stagnation, said: “We are ahead of where we expected to be at this stage, having made good progress on all six of the strategic drivers we shared in October.

“We are confident that we can build on this strong performance in the year ahead, making further progress towards our medium-term ambitions.”

Laith Khalaf, senior analyst at financial services firm Hargreaves Lansdown, noted: “Things are looking better at Tesco, but the supermarket’s profits have been diminished by the fines and compensation it has to fork out for mis-stating its profits in 2014.

“Operationally the company is staging a recovery but it’s not out of the woods just yet.”

John Ibbotson of Retail Vision pointed out that Tesco was still a long way from the profits of £3.8bn it generated in 2011.

He said: “Tesco’s fairy-tale recovery story continues. And at a time of cut-throat competition, it is all the more impressive. In his relatively short tenure, Dave Lewis has turned a thoroughly demoralised business into one with a clear sense of direction. The core UK market is starting to fire on all cylinders.

“But there’s a long way to go yet, especially with inflation likely to rise further and competition in the core UK market extreme.”

At the Tesco Bank division, operating profit before exceptional items dipped 3.1 per cent to £157m, though revenues were up 6 per cent to just over £1bn.

Lewis also used the results to make the case for Tesco’s proposed £3.7bn merger with Booker, reiterating his view that it will add shareholder value.

“Our proposed merger with Booker will bring together two complementary businesses, driving additional value for shareholders by realising substantial synergies and enabling us to access the faster growing ‘out of home’ food market,” he said.

His comments come after a number of investors spoke out against the deal in recent weeks.