Tesco turnaround continues as profit and sales rise
- by Emilio Sims
- in Money
- — Oct 5, 2017
British supermarket giant Tesco has reported a surge in half-year profits and rising sales as it hailed efforts to keep prices low amid Brexit-fuelled inflation.
Tesco's share price was subdued yesterday, shedding 0.27 percent to close at 186.65, underperforming the broader United Kingdom market, with the benchmark FTSE 100 index ending the session in positive territory.
The retailer said like-for-like sales in the United Kingdom and Ireland rose 2.2% compared to a year earlier in the 13 weeks to 26 August - the seventh straight quarter in which sales have grown.
The stock was trading at 230 pence when Lewis joined in September 2014.
Three former Tesco executives were accused of "cooking the books" to overestimate profits by £250 million, prosecutors said at the start of their trial last month.
Fund manager Ed Meier at Old Mutual Global Investors, one of Tesco's top-40 investors according to Thomson Reuters (Dusseldorf: TOC.DU - news) data, said he expected a 3 pence dividend for the full year.
In addition, Britain's largest supermarket said it would pay a 1p dividend, after announcing a 71.8p percent increase in half year profits to £885 million. In the first half of its current fiscal year, turnover grew 3.3 %, mainly thanks to advantageous exchange rate fluctuations.
'Management's long-term ambition to offer a dividend that is covered two times by earnings per share looks perfectly sensible, even if the prospective 1.7% yield on offer for this year may not be enough to excite income seekers just yet'.
Like-for-like sales, which strip out new store openings, rose 2.1% in the second quarter.
Cost savings helped to push up the operating margin, to 2.7% from 2.2% previous year, enabling it to reiterate its medium target for a 3.5% to 4.0% margin.
The company had net debt of 3.3 billion pounds by August 26. Tesco said its pension deficit had reduced to 2.4 billion pounds but it would still increase annual contributions by 15 million pounds to 285 million from April 2018.
"Tesco appears most at risk" with only 65 percent of its 743 supermarkets in the United Kingdom within 2km of an Aldi or a Lidl which is the lowest percentage among the Big Four grocers, Credit Suisse said, as quoted by Sharecast.
"Tesco has been under pressure for more transparency in recent weeks so the retailer will do everything it takes to ensure shopper satisfaction".
Its supplier has agreed to suspended operations while it retrains staff.
