Tesco's top prize on supermarket sweep is £2.85bn

Published on Tuesday 15 April 2008 21:34

TESCO called yesterday for the imminent Competition Commission report to end the long-running regulatory scrutiny of the supermarket industry as the company unveiled underlying annual profits of £2.85 billion.

The figure was 12 per cent up on the previous year, and Tesco also revealed an 11 per cent jump in sales to 51.8bn, showing it robustly shrugging off the high street downturn.

Sir Terry Leahy, its chief executive, speaking ahead of the CC's final report due by 8 May, said the early indications were that the regulator had concluded the supermarket sector was dynamic and operated to consumers' benefit.

He said: "As far as I'm concerned I hope that's the end of it. Let's hope they (now] let the consumer judge after seven or eight years of inquiries which have come to the point we all knew that it's a competitive industry and the consumer is in charge."

Tesco, which has more than 30 per cent of the market in Britain, double that of its nearest rivals Asda and Sainsbury's, saw like-for-like sales rise 3.5 per cent in the UK in the year to 23 February. Same-floorspace sales are up more than 4 per cent in the first five weeks of its new financial year.

Speaking against a depressed backdrop for retailers, Leahy said: "It is not all gloom, there are opportunities."

He added: "The UK and US is slowing, but Tesco is a value-based brand and you could argue it benefits when people are economically stressed."

He said the group had announced 170m of price cuts in the year, ranging over thousands of products. Leahy said the company's broad geographic spread also helped to offset tighter trading in the UK, with Asia and central Europe both doing well.

In the UK, Tesco's profits rose 7 per cent to 2.1m, helped by 9 per cent growth in non-food sales, including health and beauty products up 7 per cent and toys up 10 per cent.

International sales were up 25 per cent at 13.8bn, with overseas profits up 24 per cent at 701m. Tesco said it would open another 11.5 million square feet of new trading space this year – 80 per cent of it outside the UK. Korea and Thailand were stand-out performers, and the first Tesco Express convenience store had opened in China – in Shanghai.

Leahy also shrugged off "mis-placed" criticism and speculation that Tesco's fledgling US operation, Fresh&Easy, had disappointed. He said: "If I'm armed with the actual facts why should I worry about gossip?"

The new subsidiary in California made start-up trading losses since last November of 62m, but Leahy said the project was just 167 days into a (US) project "lasting a generation".

He said sales densities at the best Fresh&Easy stores were $20 per square foot "more than double the US average".

Tesco currently has 60 Fresh&Easy stores, was targeting 200 outlets by the end of this financial year, and was still projecting break-even across the Atlantic in the subsidiary's second full trading year, Leahy said.

Tesco said there had been a small number of head office redundancies in the year, but that overall it expected to create 30,000 new jobs this year, 10,000 of them in the UK.

The final dividend rises 12.7 per cent to 7.70p (6.83p).

Tesco's shares closed up 7 per cent, or 27.75p, at 418.75p.

LEAHY PLAYS DOWN HUNTER TALK

SIR Terry Leahy, chief executive of Tesco, denied that Sir Tom Hunter's near-30 per cent blocking stake in the supermarket giant's majority-owned Scottish garden centre group, Dobbies, was "an irritation".

He deflected questions about whether the Scottish magnate's stake was preventing Tesco accelerating its plans for the group it bought last summer.

Leahy said: "He (Hunter, pictured] is a shareholder. So are we.

"Obviously we will be careful to treat all equally. He's not an irritation. We are happy to have him as a shareholder."