Tesco posts mammoth profits as M&S sales continue to slide

Supercharged grocer Tesco has once again proved itself the Olympian of UK retail with record interim profits, while Marks & Spencer limped off with the wooden spoon.

Tesco revealed group sales had climbed by 12.2 per cent to£16.5 billion and sales in its domestic market jumped by 11.5 per cent to£13.1 billion for the 24 weeks to August 14. Like-for-like sales were ahead by 8.3 per cent.

However, M&S's like-for-likes for the 24 weeks to September 18 were down by 4.2 per cent.

Tesco chief executive Sir Terry Leahy said the grocer's continued success is because of the consistent execution of its four-part strategy, focused on its core UK business, non-food, retail services and international growth.

He singled out the growing non-food business as a key performer.

He said: 'We are attracting more customers to non-food and are selling products through much faster. The economics of this are compelling.'

M&S chief executive Stuart Rose blamed the chain's poor performance 'primarily' on buying. He said footfall had held up, but buying needed to be more focused.

Rose described womenswear as 'the golden key that unlocks the business'.

He added: 'We've got to make this business sing and we've got to make it sing in harmony.'

Tesco's non-food sales continued to power ahead, growing by 17 per cent in the first half. Leahy emphasised that the grocer has the fastest-growing clothing business in the UK, boosted by its Cherokee and Florence & Fred brands.

Tesco's clothing sales soared by 39 per cent in the first half. Clothing is sold in about 200 stores, but will be rolled out to more shops as Tesco turns superstores into Extra hypermarkets. It will open its 100th Extra store by the end of the year, and Leahy said another 20 or so will follow next year, mainly as a result of extensions.

At M&S, clothing sales fell by 2.5 per cent in the 24 weeks to September 18, but Rose said the retailer will remain focused on quality.

He said it would not offer any '4 Tesco jeans'. 'Everybody knows it's a loss leader, and this business doesn't work in that way,' he added.

He referred to a recent newspaper article about value clothing from supermarkets, and said: 'When you wash it five times you end up with five postage stamps at the end of the week.'

Rose noted that M&S has suffered intense competition from fashion rivals.

He singled out Next, saying: 'We've left them an open door and they've come in and raped us for the past two or three years.'

Tesco has increased its share of the entire UK retail market from 12 per cent to between 12.5 per cent and 13 per cent in the past year, according to finance director Andrew Higginson. The retailer announced interim group pre-tax profit up 28 per cent to£804 million.

- Leader: page 11

Tesco Total sales: +12.2%

UK clothing sales: +39%

UK non-food sales: +17%

24 weeks to August 14

M&S Total sales: -0.7%

Clothing sales: -2.5%

Clothing/home sales: -3.9%

24 weeks to September 18.