Tesco rakes in profits as chief hails turnaround

Tesco has announced a bumper full-year profits haul as the grocery chain continues an impressive turnaround under boss Dave Lewis.

The supermarket giant reported a 28.8% rise in annual pre-tax profits to £1.67bn, ahead of forecasts, while revenue grew 11.2% to £63.9bn.

Like-for-like sales increased by 2.9% over the 52 weeks to February 23, which included a 1.7% jump at Tesco and 11.1% at wholesaler Booker.

Comparable sales were up 1.9% in the fourth quarter in the UK and Ireland.

Mr Lewis said: “After four years we have met or are about to meet the vast majority of our turnaround goals. I’m very confident that we will complete the journey in 2019/20.

“I’m delighted with the broad-based improvement across the business. We have restored our competitiveness for customers – including through the introduction of ‘Exclusively at Tesco’ – and rebuilt a sustainable base of profitability.

“I’m pleased that we are able to accelerate the recovery in the dividend as a result of our continued capital discipline and strong improvement in cash profitability.”

The group issued a final dividend of 4.1p, giving a full-year return of 5.77p per share. This compares to 3p last year.

Tesco said its annual profit margin of 3.45% represents “clear progress” and puts it “comfortably in the aspirational range” that Mr Lewis set four years ago.

Tesco chief executive Dave Lewis (Joe Giddens/PA)

The results come at a difficult time for the retail sector as consumer confidence takes a knock from Brexit worries.

Mr Lewis said that there was “fatigue” among shoppers over the never-ending drama at Westminster, but added: “I’m not seeing any change in buying behaviour.”

In addition, supermarkets are battling rising costs and fierce competition in the sector as Lidl and Aldi continue their relentless march.

Sainsbury’s and Asda have also agreed to merge, but are awaiting the competition watchdog’s approval.

As part of efforts to position Tesco to meet the challenges of a rapidly changing market, Mr Lewis forked out £3.7bn to acquire cash-and-carry business Booker and launched Jack’s, a discount chain that will supposedly rival the German discounters.

However, January also saw Tesco announce that up to 9,000 jobs are at risk across its head office and stores as part of a major cost-cutting drive.

Shares were up 1.5% in morning trade at 237.3p.

Julie Palmer, partner at Begbies Traynor, said: “CEO Dave Lewis has rebuilt the brand since its accounting scandal in 2014, helping to reduce costs by improving efficiencies in distribution and procurement while investing in new areas.

“External threats are also putting pressure on the retailer with continued uncertainty due to Brexit and the turbulent high-street conditions.

“With Marks & Spencer’s tie up with Ocado and Amazon’s new grocery arm, Amazon Fresh, Dave Lewis will be wary of standing still and instead will want to keep moving.”

- Press Association

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