Tesco cash-and-carry deal to boost profits to £1bn
TESCO is poised to reveal a doubledigit rise in profits this week thanks to strong summer sales and its takeover of cash-and-carry chain Booker.
Analysts are expecting operating profit to climb 13pc to £1bn for the half year, as the royal wedding, World Cup and summer heatwave bolstered sales. Tesco will also be handed a further boost from Booker. The performance of Britain’s biggest food and drink wholesaler will be included in the grocer’s half-year results for the first time since the £3.7bn deal earlier this year. Revenues at Tesco are expected to rise 11pc to £31.5bn for the period.
David Mccarthy, HSBC’S global head of consumer retail, said the supermarket chain had enjoyed a “good first half” in what had been a strong spell for the grocery sector as a whole.
He added: “We believe that this has been a profitable first half, with the uptick in sales being at a good marginal profit, being fresh-food driven, and with less price aggression than in the first half [of] last year. This is underpinned by excellent sales at Booker, the realisation of synergies and the costcutting programme.”
Wednesday’s update comes two weeks after Tesco threw down the gauntlet to German discounters Aldi and Lidl by launching the budget chain Jack’s. Dave Lewis, chief executive, will be expecting to field questions on the bargain grocery brand’s performance. The first two stores are already up and running in Chatteris, Cambridgeshire, and Immingham, Lincolnshire. Up to 15 are expected to be rolled out over the next year.
Jack’s will have 2,600 product lines, compared to about 25,000 in a Tesco supermarket, with 1,800 of those being sold under the Jack’s branding. It will be supported by 350 suppliers that already provide goods to Tesco.
Tesco is Britain’s grocery market leader with a share of 27.4pc. But its share has been cut by Aldi and Lidl, who have increased their combined slice of the market to 13.1pc, according to Kantar Worldpanel data.
Past attempts by the more established players to launch discount brands, such as Sainsbury’s Netto brand in 2014, have failed.
Dave Lewis, Tesco chief executive, will update investors and analysts on his plans for the Jack’s budget brand