Shares in Tesco rose this morning (30 September) after the UK’s largest retailer posted a jump in half-year profits.
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Tesco booked a 10.3% rise in underlying pre-tax profits to GBP1.45bn (US$2.61bn) for the six months to 23 August. Group sales were up 14.1% to GBP28.1bn.
Domestically, sales grew by 9.7%, reaching GBP20.1bn. One a like-for-like basis and excluding fuel, sales were up 3.7% during the company’s first half.
Tesco said its UK food sales were “solid” during the first half of its fiscal year, although it had seen evidence of consumers trading down in some categories to relieve “stretched” household budgets.
Tesco’s trading profit from its UK business rose 8.6% to GBP1.08bn. Trading margins were “stable” on the year at 5.9%, the company added.
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By GlobalDataThe company’s international sales climbed 26.8% to GBP8bn, thanks to favourable exchange rates and the addition of store space.
Stripping out the effect of currency exchange, international sales were up 12.6%. On a like-for-like basis, sales outside the UK rose 1%, with net new store space making up the lion’s share of the growth.
At constant exchange rates, Tesco said trading profit from its international businesses grew by 15.9% to GBP346m – before the losses incurred by its fledgling business in the US.
Losses from Tesco’s Fresh & Easy stores across the Atlantic reached GBP60m. “These planned losses reflect the fact that the US business – which has been trading for nine months – has been built with the necessary infrastructure in place from the beginning to support hundreds of stores,” Tesco said. “At this stage, it is therefore operating with high overhead and other costs in relation to the scale of the business, whilst also trading from immature stores.”
Sales from Tesco’s Fresh & Easy stores stood at GBP76m for the half year.
Chief executive Terry Leahy said Tesco had made “good progress” despite the tough economic environment.
“Tesco is at its best in tough markets – responding to the changing needs of customers – and that’s why we have been able to make good progress this year, despite facing into powerful economic headwinds and carrying planned start-up losses in the US,” Leahy said.
“Our business is strong, broadly-based, increasingly international and, I believe, well-placed not just to cope with the challenges which lie ahead but also to grasp the growth opportunities open to us by continuing to invest in our strategy.”
Shares in Tesco were up 3.6% at GBP13.30 at 10:40 BST this morning.
