Tesco says turnaround "firmly on track" as sales rise

Jon Howard
October 5, 2017

Tesco has said its turnaround is "firmly on track" after posting a surge in profits in its interim results and resuming dividend payments.

Group sales were up 3.3% to £25.2bn for the 26 weeks ending August 26 2017, while United Kingdom like-for-like sales - excluding sales from stores opened in the past year - grew by 2.2%.

Mr Lewis said that Tesco was "shocked" by the discovery and that the supermarket had audited the factory's food quality commitments.

Chief Executive Dave Lewis explained that the announcement reflected the confidence that they could build on their strong performance to date and that in doing so, they could create long-term sustainable value for all of their stakeholders.

The group said United Kingdom and Ireland underlying operating profits leapt 21.1% higher to £471m (€531m) in its first half after it notched up its seventh quarter in a row of rising sales.

Net profit came in at £637-million (R11,665, $846 million, 719 million euros) in the six months to August, the world's third-largest supermarket group said in a statement.

"It's a significant milestone in the recovery of the business and one which demonstrates the confidence we and the board have in our plans", he told reporters.

Revenue in the 26 weeks to 26 August of £28.3bn was 3.7% higher than the same period past year and ahead of the consensus estimate of £27.6bn.

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Half-year results also revealed Tesco would ramp up payments into its group pension scheme by £15 million a year to £285 million from next April.

The supermarket chain struck a £3.7bn deal to buy food wholesaler Booker in January, which is now being probed by the Competition and Markets Authority.

ETX Capital analyst Neil Wilson said Tesco's drive to keep down prices was giving the company "an edge over the other big players in terms of coping with discounters", such as growing German players in the United Kingdom market, Aldi and Lidl.

Two members of Tesco's financial team resigned in 2014 because they were concerned that their professional integrity was being compromised by what they were being asked to do by their bosses, a court heard on Tuesday.

John Ibbotson, director of the consultancy Retail Vision, said the timing of Tesco's surging return to form couldn't have been more striking.

The Competition and Markets Authority (CMA) is expected to report its provisional findings next month, with a final decision due in December.

Mr Lewis confirmed that Tesco would resume paying a dividend, a move that had been widely anticipated after the company notched up its seventh quarter in a row of rising sales.

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