The UK’s biggest retailer, Tesco PLC, yesterday announced a six-fold surge in annual net profit after the supermarket giant exited Asian markets and was allowed to stay open during COVID-19 lockdowns.
Profit after tax soared to ￡6.14 billion (US$8.44 billion) in the 12 months to the end of February from ￡971 million in the previous year.
However, pretax profit fell by about one-fifth to ￡825 million, hit by the cost of employing thousands of extra staff to meet booming online demand for groceries.
Earnings were also affected by the supermarket’s decision to repay the British government tax relief received during the COVID-19 pandemic.
“While the pandemic is not yet over, we’re well-placed to build on the momentum in our business,” Tesco chief executive officer Ken Murphy said yesterday in an earnings statement.
“We have doubled the size of our online business and ... we’re building a digital customer platform,” he added.
Tesco said that in response to the “unprecedented increase in customer demand,” annual online sales in the UK jumped by 77 percent to ￡6.3 billion.
“In terms of the outlook, Tesco said it expects sales volumes to decline as lockdown restrictions ease. However, costs are also expected to decline as well,” said Michael Hewson, chief market analyst at CMC Markets UK. “This should translate into better margins, and an increase in profits, which should head back to the levels seen last year.”
As the pandemic began to take hold in March last year, Tesco struck a deal to sell its businesses in Thailand and Malaysia to Thai conglomerate Charoen Pokphand Group Co for ￡8.0 billion, which massively skewed its annual performance.
The transactions, agreed under Murphy’s predecessor, Dave Lewis, were aimed at slashing debt and streamlining the group, enabling a stronger focus on its British, Irish and central European activities.
Ahead of its earnings, Tesco set targets to offer more nutritious foods following pressure from shareholders to take part in efforts to combat obesity.
Tesco said it would strive to raise sales of healthy products to 65 percent of total sales by 2025, up from 58 percent.
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