Every little helps as Tesco rings up £1bn in sales every week

Published on Tuesday 21 April 2009 22:08

SUPERMARKET giant Tesco has rung up sales of £1 billion a week and annual profits of more than £3 billion for the first time.

The UK's biggest supermarket set a new record among British retailers with group sales coming in at 59.4 billion.

Terry Leahy, chief executive of Tesco, said he was confident the retailer would "make good progress even in the current global economic environment", as he announced the 3.13 billion pre-tax profits figure.

In the UK, the company has pledged to keep increasing its selling space by 6 per cent to 7 per cent annually after opening more than 150 stores in the last year.

But last night campaigners baulked at the pace of growth, raising fears about the impact on smaller high-street stores.

Helen Rimmer, of Friends of the Earth, said: "As Tesco tills around the country ring with record takings, we need to ask who is paying for Tesco's billions. There is growing evidence that the Tesco takeover is harming farmers, consumers and the environment.

"The government must bring in stronger planning rules to support thriving town centres and local economies, and a supermarket watchdog to ensure a fair deal for farmers."

And NFU Scotland urged Tesco to show responsibility to its suppliers as its dominance of the market continues. Tesco is the largest single customer for Scottish agricultural produce.

Jim McLaren, the NFUS president, said: "With great success comes great responsibility and an expectation that those who deal with Tesco are treated in a fair and proper manner."

Tesco said it would rein in some UK expansion, buying fewer stores from competitors and spending less on new "mixed-use" developments.

The chain said it was reducing prices where possible to help customers, but cautioned that the weak pound may push some prices up as it hits import costs.

Retail experts described the chain's performance as "resilient" amid the recession. But the results also showed the impact of a tough year for Tesco, with the profits growth far lower than the 11.8 per cent seen the previous year. UK like-for-like sales grew 3 per cent, excluding petrol, with growth in the fourth quarter of 2.7 per cent.

Mr Leahy conceded that the chain was losing some market share to other retailers such as Morrisons. Morrisons and Sainsbury's saw full-year sales rise 7.9 per cent and 4.5 per cent respectively as shoppers switched in search of the best value.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: "Some of Tesco's UK supremacy has undoubtedly been eroded by rivals playing the value card, but few of those competitors have the diversified business mix which leaves (Tesco] well placed.

"These results have shown a resilience which should remind investors of Tesco's innate strength."

Last year it was reported that nearly 3,000 greengrocers had closed in the past decade, amid claims that customers are paying more for their fruit and vegetables at supermarkets. The closures, which critics say highlighted the "slow death" of the British high street, have been caused by the growing power of supermarket chains.

IN NUMBERS

&#149 SALES of 1.02 billion were rung up worldwide each week in the past year.

&#149 Record pre-tax profits of 3 billion come four years after it hit the 2 billion mark and eight years after it reached the 1 billion milestone.

&#149 The chain has a 30 per cent-plus share of the UK supermarket sector.

&149 Some 283,000 staff are employed in the chain's 2,280 stores; 469,000 staff are employed in its 2,077 stores overseas.

&#149 It now has almost 15 million Clubcard members in the UK and seven million overseas.

&#149 Tesco has more than 12,500 products available online through Tesco Direct.

&#149 Tesco sold three copies per second of the latest Bond film, Quantum of Solace, on the day it was released on DVD.

&#149 The supermarket sold 60 million Easter eggs this year – twice the number it sold last year.

&#149 It sold 45,000 of its 12 shift dress in the first three weeks of the season.

Analysis: The key is confidence to go for growth

THREE billion pounds is a number with a lot of noughts on the end in these recession-hit times, writes Jane Wood.

But the news from Tesco was hardly surprising, given that the superstore giant has a presence in every postcode in the UK, is adept at responding to market changes and truly understands its customers.

Love or loathe it, you can't disagree that Tesco is brilliant at what it does. But the really interesting thing is the often-unresolved question about what its 14-year dominance means for other retailers.

There are lessons to be learned from the rise and rise of Tesco. For smaller retailers, those might be about niche marketing or adaptability.

But in this economic climate, the most pertinent one is about confidence: Tesco has never been afraid to take strong decisions that helped it grow.

• Jane Wood is the director of the Edinburgh Chamber of Commerce and chairwoman of business group Essential Edinburgh.