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October 2, 2007

UK: Tesco H1 profits leap despite UK slowdown

Tesco, the UK’s largest food retailer, has enjoyed a 19% jump in first-half profits, despite seeing sales growth slow in its domestic market.

Tesco, the UK’s largest food retailer, has enjoyed a 19% jump in first-half profits, despite seeing sales growth slow in its domestic market.

Tesco booked an 18.9% in operating profit to GBP1.3bn (US$2.7bn) for the six months to 25 August. Revenue climbed 9.1% to GBP22.6bn.

The company said it had “coped well” in the UK after a summer of wet weather and growing competition from the likes of Wal-Mart’s Asda. Like-for-like sales grew 2.7%, although Tesco admitted UK sales had slowed during June and July.

Tesco’s international sales were robust, jumping 22% to GBP6.4bn, figures that were buoyed by new stores and a first full contribution from its business in China. Stripping out China, sales were up 14.3%; on a like-for-like basis, sales inched up 1.2%.

Chief executive Sir Terry Leahy said Tesco had seen “strong first half progress”, adding that he is “confident” of further progress during the rest of the year.

Sales and earnings were up in Europe, although margins were stable after integration costs from the acquisition of Casino’s Leader stores in Poland. Sales increased 18.8% to GBP3.6bn; trading profit was up 17.6% to GBP147m.

Turnover and profits were also on the up in Asia, buoyed by “strong performances” in Korea, Thailand and Malaysia, Tesco said. Sales rose 26.1% to GBP2.9bn; trading profit was up 18.1% GBP124m.

Tesco said its US venture, Fresh & Easy, is “on track” to open its first stores in California next month. The company plans to open 50 stores by the end of its financial year in late February.

Tesco added that its estimates of start-up costs in the US would remain at GBP65m in its current financial year. The company is aiming to invest some GBP250m a year in the US going forward.

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