Tesco, the world’s No. 3 retailer, showed its resilience to the economic downturn, posting a 10 percent rise in underlying annual profit to £3.13 billion (US$4.6 billion), a record for a British retailer.
The supermarket group, which employs 440,000 people in about 4,000 stores across 14 countries, also said yesterday it had made a good start to this fiscal year during which it planned to add 26,000 jobs and more than 743,000m2 of new space.
However, chief executive Terry Leahy said it was “impossible really to say” when Tesco’s US business would break even, because of the economic downturn.
PHOTO: REUTERS
Tesco had planned for its US Fresh & Easy chain to break even at the end of this fiscal year, but said it now expected the business to make a similar trading loss to the £142 million for the year just ended.
Leahy said he was “absolutely” committed to the US chain.
Tesco’s sales rose 15.1 percent to £59.4 billion in the 53 weeks ended Feb. 28. Its dividend was raised 9.7 percent to £0.1196.
Analysts’ median forecast was for Tesco to make profit before tax and one-off items of £3.04 billion, a Reuters Estimates poll of 19 analysts found.
“It looks as if the consumer is stabilizing at least, so you’re not seeing the situation worsening,” Leahy said in a telephone interview. “[But] I think it’s too early to forecast when an upturn will come.”
Leahy said Tesco was not expecting to reach its medium-term target of growing underlying British sales by between 3 percent and 4 percent this fiscal year because of the recession, but he said trading in the early weeks of the new year was within that range.
Sales at British stores open at least a year, excluding gasoline, rose 3.4 percent in the first six weeks of the new financial year, up from 2.7 percent in the fourth quarter.
“Very reassuring, very solid,” said Shore Capital analyst Clive Black, who was particularly encouraged by the improving trend in underlying British sales. “It shows that, in difficult times, management is on top of the operation.”
Tesco said it planned to cut capital expenditure to around £3.5 billion this year from £4.7 billion last year.
Net debt jumped to £9.6 billion to pay for an acquisition in South Korea and a deal to buy Royal bank of Scotland out of a financial services joint venture.
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