Tesco profits ups as turnaround kicks in

UK supermarket Tesco has managed to turnaround several years of lacklustre results, booking a pre-tax profit of £1.3 billion (AUD$2.38bn) for the year ended 24 February, up 795 per cent.

The grocery giant’s shares jumped almost 6 per cent in the UK overnight on the figures, which included a 2.2 per cent increase in like-for-like sales in its home market and a 29.6 per cent reduction in net debt.

“This has been another year of strong progress, with the ninth consecutive quarter of growth. More people are choosing to shop at Tesco and our brand is stronger, as customers recognise improvements in both quality and value,” Tesco chief executive Dave Lewis, who was appointed in 2014 to turnaround the business, said.

“We have further improved profitability, with Group operating margin reaching 3.0% in the second half.  We are generating significant levels of cash and net debt is down by almost £6bn over the last three years.  All of this puts us firmly on track to deliver our medium-term ambitions and create long-term value for every stakeholder in Tesco.”

There are now 260,000 more people shopping at Tesco, driving group revenue up by 2.3 per cent to £51 billion (AUD$93.18bn).

Sales increases were booked in all Tesco’s operating region’s bar Asia, where LFL sales worsened over the year, decreasing by 14 per cent in the fourth quarter.

The business has now completed its £3.7 billion (AUD$6.76bn) acquisition of wholesaler Booker and has begun improving its top line growth, leaving it on track to deliver at least £200 million (AUD$365m) in pre-tax synergies.

“I am delighted to have completed our merger with Booker, and we are moving quickly to deliver synergies and access new growth, making the most of the complementary skills in our combined business,” Lewis said.

Tesco reiterated its commitments set out in October 2016 to reduce costs by £1.5 billion (AUD$2.74bn) and generate an additional £6.3 billion (AUD$11.51bn) in retail cash from operations while also improving margins between 3.5 per cent and 4 per cent by 2019/20.

Tesco’s operating margins increased by 57 basis points year-on-year to the year ended February 24 to 2.9 per cent.