Tesco rings up £70-a-second profits as expansion goes on

The supermarket chain now pockets 70 a second, up 17 per cent on last year, and makes sales of 41.8 billion - more than double the value of Scotland's entire retail sector.

Shoppers benefited from lower prices as Tesco faced up to better competition from resurgent Sainsbury's and Morrisons, while shareholders earned a 1.5 billion payout.

Further expansion plans were announced, including another 100 Express stores and 25 larger Extra sites, creating 20,000 jobs and bringing the total number of UK stores to almost 2,000. Tesco stores already cover an area two and a half times the size of Perthshire.

But the chain also sought to assuage fears of its commercial dominance and its impact on the environment by announcing a 100 million fund to increase energy efficiency and cut carbon emissions, and the use of wind turbines and solar panels at some of its stores.

As sales and profits at Tesco have risen, so has the dismay of environmental and community campaigners. In Inverness, where the chain's three stores account for more sales than every other shop in the area put together, the local MP renewed calls for a Competition Commission inquiry into the power of Britain's supermarkets.

Danny Alexander, the Liberal Democrat MP for Inverness, Nairn, Badenoch and Strathspey, said: "Tesco has a 51 per cent share of our local market - the biggest share that any retailer has in any UK city.

"Such massive market dominance has serious implications for consumers, for farmers, for small shops and city centres. The Competition Commission needs to investigate whether the power enjoyed by supermarkets is being abused, and take action to level the playing field." The Federation of Small Businesses said Tesco's success had been achieved "on the back of the loss of many small, independent traders". A federation spokesman said Tesco placed increasing pressure on smaller suppliers, "forcing them to get by on ever-decreasing margins".

John Kinnaird, president of NFU Scotland, said: "Tesco's profit is greater than the output of all of Scotland's 20,000 farm businesses put together.

"I am not against efficient businesses, nor tough competition. But when tough competition crosses the line and power is misused, there must be action. The market is not working well for consumers.

"The supermarkets' continued squeeze on food processors and their farmer suppliers is threatening the future supply of quality Scottish produce."

Campaigners hope that the Office of Fair Trading will confirm its intention next month of passing findings on possible anti-competitive practices in the supermarket sector to the Competition Commission for a full investigation.

Pricing tactics and the alleged use of "land banks" to prevent rival retailers opening new outlets have been called into question by the OFT.

Friends of the Earth's supermarkets campaigner, Sandra Bells, said: "The government and competition authorities must recognise the value of small shops to local communities and create an environment that allows retail choice to flourish."

Tesco said it was confident that the OFT's observations were "misplaced" and insisted it did not have a land bank.

The company's chief executive, Sir Terry Leahy, said: "This is a complete red herring. We only own land to develop for Tesco and if we can't develop for Tesco we sell the land on."

Challenged on claims that, if stores were built on all Tesco's land, the company could increase its share of the market from 29 per cent to 45 per cent, Sir Terry responded: "Nonsense - that's totally inaccurate."

He added:

"All of the land we have is in some stage of development for a Tesco store here and around the world. We have only just about sufficient land to meet our reasonable growth objectives."

Sir Terry said he did not know how many acres of undeveloped land Tesco owned.

He said it had been a challenging year for the group, with rising energy bills and business rates. Despite this, the chain achieved like-for-like sales growth of 7.5 per cent. Price cuts resulted in deflation of 1.8 per cent in its UK stores, while 130 million in overheads was added through rates and energy bills.

The supermarket chain plans to build a store in Aylsham, Norfolk, which will be made entirely from recyclable materials such as wood and recycled plastics.

It also pledged to halve the amount of energy it used in its stores by 2010 compared with its consumption levels in 2000.

It said it would use geothermal power and gasification, which turns waste into clean and sustainable power, as it looked to deliver "a huge reduction in carbon emissions".

The proposed supermarket in Aylsham follows on from two "model energy stores" in nearby Diss, and in Swansea, which use less energy than other Tesco stores thanks to clear roofs that maximise natural light, wind turbines that power the tills, and cold air from chilled areas used for air-conditioning.

Sir Terry insisted the move towards reducing environmental damage was not a gimmick to improve the image of the company. "It's a big investment," he said. "100 million is not a PR stunt."

Tesco also said it would continue to cut carbon emissions from its vast distribution fleet, and added that there would be further investment in recycling schemes for its customers.

In a similar move, the government will today launch a Food Industry Sustainability Strategy aimed at encouraging producers to face up to the impact they make on climate change.