Profit jumps almost 70% in first half

LONDON: British supermarket giant Tesco yesterday posted surging firsthalf profit on the back of elevated pandemic sales and its “resilient” supply chain.

Profit after tax jumped almost 70% to £781 million ($1.1 billion) in the six months to the end of August, the nation’s biggest retailer said in a statement.

That compared with £465 million a year earlier, when the group was also buoyed by the Covid-19 pandemic.

Tesco also ramped up its annual profit forecast and unveiled a £500-million share buyback.

Revenue rose 6% to £30.4 billion as it continued to benefit from elevated sales as a result of the pandemic.

“We’ve had a strong six months; sales and profit have grown ahead of expectations and we’ve outperformed the market,” added chief executive Ken Murphy.

He pointed to “the resilience of our supply chain and the depth of our supplier partnerships” as a key factor.

A significant number of UK retailers are currently unable to source enough products because of the supply crunch caused in large part by a shortage of lorry drivers owing to Covid and Brexit fallout.

“As industry supply chains came under increasing pressure, we were able to ... maintain good levels of availability for customers, contributing to our market outperformance,” the group added.

Operating profit leapt 28% to £1.3 billion in the reporting period.

And Tesco lifted its annual operating profit target to between £2.5 billion and £2.6 billion.

The group warned however that some of the elevated sales would “fall away” in the second half.

And it cautioned over the uncertain external environment and changes to customer behaviour.

Tesco also took an exceptional charge of £193 million from settling claims relating to its misstatement of profits in 2014.

Britain’s supermarket sector benefited enormously from a shift to online shopping during the pandemic.

Tesco last year doubled the size of its online business in response to massive demand.

“The retail sector is undergoing significant change,” the group added yesterday.

“Customers are faced with an increasing range of choices as to where, how and when to shop, with the Covid-19 pandemic accelerating a number of profound shifts in consumer behaviour.

“The competitive environment has changed materially, with a particular emphasis on value and greater importance placed on fuller-service offerings such as grocery home delivery.”