Blog: Tesco rides the "tailwinds of recovery"
Petah Marian | 5 October 2010
Tesco reported its first-half results today, marking outgoing CEO Terry Leahy's last press conference before Philip Clarke takes over the helm early next year.
Commenting on the results, Leahy said: "The global economic headwinds of the last two years are being replaced by the tailwinds of recovery in most of our markets and this is helping our International businesses to resume strong sales and profit momentum."
The first-half numbers were broadly strong, with most of the growth driven by its international operations, with its US operations posting the highest sales growth, while Korea posted an "outstanding" 23.3% sales growth.
The analyst community were greeted broadly positive, although analysts highlighted some concern over the retailer's less impressive growth in the UK, with like-for-like sales up just 0.3%. However, Leahy was confident that the growth would improve through the autumn as consumer confidence continues to increase.
"Beneath the headline number UK performance is far more muted and excluding the boost from higher petrol prices and the rise in VAT, underlying sales growth is pretty anaemic. As the largest grocer in both sales and space terms it is becoming increasingly difficult for Tesco to eke out incremental growth from the UK market," said Verdict consulting director Neil Saunders.
However, both analysts and the retailer were upbeat when speaking about Tesco's US venture, with Tesco announcing bold plans for the unit to be profitable by 2012/13 on the back of an aggressive expansion plan. Hopefully the results should silence the ongoing criticism the division has faced after a number of years of losses and set backs around the challenging US economic landscape.
With Sainsbury's results to come tomorrow and Marks & Spencer Q2 trading update on Thursday, we'll be able to get a clear picture of how the UK's leading retailers are really performing.
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