Tesco unveils sparkling results

Tesco, the UK's number one retailer, continued its steamroller progress as it posted a pre-tax profit of£1.6 billion on Tuesday.

In the year to February 28, the retailer - the sixth largest global player, according to M&M Planet Retail - delivered an almost perfect report card.

Group sales climbed 18.7 per cent to£33.6 billion, and UK sales moved ahead 16.3 per cent to£26.9 billion.

However, that was the tip of the iceberg. Chief executive Sir Terry Leahy reported that Tesco had delivered on all aspects of the strategy outlined seven years ago, including building a strong UK core business and conquering non-food, financial services and overseas markets.

Leahy said Tesco's strategy had transcended the period of 'greatest risk'.

The core UK business delivered like-for-like growth of 6.7 per cent, with the Cherokee and Florence & Fred brands fuelling the fastest-growing clothing offer in the UK.

The success of Tesco Personal Finance and Internet arm Tesco.com is such that expansion is now self-financing. Tesco.com made a profit of£28 million for the period, up from last year's£12 million, and sales surged by 29 per cent to£577 million.

However, Tesco's universal success is starting to grate with some observers, and is attracting Wal-Mart comparisons as healthy market shares reach unhealthy proportions. Tesco now commands 12.8 per cent of the UK's total retail market and has a 27.3 per cent grocery share.

Leahy was unfazed. 'Customers have choices,' he insisted. 'It doesn't matter how big you get, if you don't serve your customers well they will go elsewhere. It is not comfortable - some (supermarkets) are being squeezed, some are making progress. The battle is fiercely engaged and that will continue.'

Broker Charles Stanley said the results brought no earth-shattering surprises. 'Its (Tesco's) hegemony of UK food retailing looks unassailable.'


Tesco is poised to add China to its overseas battery, as the barriers that made the middle kingdom a closed shop start to tumble.

Tesco non-executive chairman David Reid said a team had been in place for three years and, subject to striking the right partnership, saw great potential for the ripe market. Reid said Tesco would seek growth on an 'organic' basis.

'China is a large market and there are good signs of growth in cities in the East, and the large formats we are good at are popular with customers,' he said. 'It is difficult to find the right partners, but the rules that used to prevent modern retailing are being unwound.'

Reid said Tesco had good scale in Asia and would be able to draw on expertise from its Taiwanese operation.

Asian sales rose by a third to£2.8 billion for the period, with profits rocketing 72 per cent to£122 million. Thailand now pays its own way, while Taiwan delivered a stand-out like-for-like performance of 22 per cent.

The retailer also gave discounters a run for their money in Europe, where Leahy asserted that no discounter had achieved more market share gains than Tesco. European retail moved ahead 27.5 per cent to£3.8 billion, pushing operating profit up 30 per cent to£184 million.