Tesco cash-and-carry deal to boost prof­its to £1bn

The Sunday Telegraph - Money & Business - - Business - By Ben Woods

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

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