Tesco ‘outperforms’ with sales and profits growth

Tesco has seen sales and profits grow faster than expected as Britain’s biggest supermarket group shrugged off the pandemic impact.

In the six months to August, Tesco said it “outperformed” the grocery sector, but also flagged that the sales surge could now start to “fall away”. But it would still mean stronger profits growth this year than was first thought, a Tesco statement said.

It came as rival Morrisons said it was recruiting 3,000 staff for Christmas. The jobs are in distribution centres and manufacturing sites across the UK, ranging from warehouse and production staff to pickers and packers, as well as other skilled roles such as fork-lift truck drivers.

Like Morrisons, Tesco is adjusting to labour shortages and supply chain problems in the run-up to the key festive period.

However, chief executive Ken Murphy said the company was “in good shape for Christmas”, adding he believed the company’s resilience was due to its “long-standing partnerships with suppliers”.

“With various different challenges currently affecting the industry, the resilience of our supply chain and the depth of our supplier partnerships has once again been shown to be a key asset,” he said.

But he told a conference call with journalists that there would still “be bumps in the road in the run-up to Christmas. We’re seeing our share of challenges”.

Analyst Sophie Lund-Yates, from investment platform Hargreaves Lansdown, said “Tesco’s enormous scale means it is weathering the supply chain crisis better than others. It is times like these when being the biggest fish in the pond really counts.

“The size of Tesco’s distribution network also can’t be overstated, which again gives the group the flexibility to deliver the goods at scale.”

Tesco’s group revenues jumped by 5.9% to £30.4bn for the six months compared with the same period last year. Operating profits increased by 28% to £1.3bn for the period.

Sales in the first six months of Tesco’s financial year rose 2.6% to £27.3bn, while UK like-for-like sales rose 1.2%, having risen 0.5% in the first quarter.

Analysts said Tesco was benefiting from its huge online business, from a pricing strategy that matched the prices of German-owned discounter Aldi on around 650 products and the success of its Clubcard Prices loyalty scheme, which offered lower prices to members.

But the company has again signalled concerns about possible food price inflation, following Tesco chairman John Allan’s warning last month in an ITV interview that costs could rise by 5% this winter.

Source: bbc.com