Shares in UK retail giant Tesco rose by more than 5% this morning (21 April) after reporting a 10% rise in annual underlying pre-tax profits.
The company, the world’s third-largest food retailer, booked underlying profit before tax of GBP3.13bn (US$4.56bn) for the 53 weeks to 28 February. Stripping out the impact of the extra selling week, profits rose 8.8%.
Group revenue excluding VAT rose 13.4% on a 52-week basis to GBP54.3bn. Tesco’s international sales rose by 13.3% at constant currencies as the company saw its growth in Asia accelerate on the back of the Homever acquisition in South Korea.
In the UK, where Tesco’s sales growth has lagged rivals including Asda and Morrisons, sales increased by 9.5% to GBP41.5bn. On a like-for-like basis, UK sales rose by 4.3%, which included a contribution of 2.1% from the 53rd week.
Chief executive Terry Leahy said: “We have delivered a solid sales and profit performance, both in the UK and internationally, whilst continuing to invest in our long-term strategy for growth.”
Across the Atlantic, however, Tesco’s Fresh & Easy business in the US reported higher losses. Trading losses stood at GBP142m, up from GBP62m a year earlier.
Tesco recently decided to slow the pace of its expansion in the US, a move that lead to its sales in the country being lower than forecast at GBP208m.
“At constant exchange rates, trading losses were £123m, higher than our guidance provided last year, reflecting the more challenging trading environment in the Western states and our decision not to open stores in Northern California for the time being,” Tesco said.
Looking at current trading, Tesco said its sales had grown by 9.2% during the first six weeks of its financial year – or by 12% excluding fuel.
“In the UK, our planned investment in strengthening further our offer for customers is going well. UK like-for-like sales growth, excluding petrol, was 3.4% in the first six weeks. On a VAT-adjusted basis, growth was higher, at 4.4%.
The company added: “International progress has been robust given the economic environment. Sales growth was strong – 21.5% at actual rates. Sales grew significantly more rapidly in Asia than in Europe, helped by the early success of the Homever acquisition. At constant rates, overall International sales growth was 11.9%.”
Leahy added: “We have made a good start to the new financial year and I am confident Tesco will continue to make good progress even in the current global economic environment.”
Tesco shares were up 5.4% at 350.1p at 09:15 BST this morning.