Tesco hails turnaround as full year profit surges 34%

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Tesco profit
// Tesco reported a better-than-expected 34% rise in full year operating profit to £2.21bn
// Analysts had expected Tesco to report operating profit before exceptional items of £2.08bn
// Group sales rose 11.5% to £56.9bn
// Tesco also recorded its 13th quarter of like-for-like sales growth with a 1.7% increase

Tesco has posted bumper full year profits as the UK’s biggest retailer approaches the home stretch of its turnaround under chief executive Dave Lewis.

For its financial year ending February 23, the Big 4 grocer reported a better-than-expected 34 per cent rise in full-year operating profit to £2.21 billion – ahead of analysts’ expectations of £2.08 billion and up from £1.64 billion recorded in the previous year.

Meanwhile, group sales rose 11.5 per cent to £56.9 billion and the supermarket giant recorded its 13th quarter of like-for-like sales growth in the UK, with a 1.7 per cent increase in the final quarter.

On a full-year and group-wide basis, Tesco’s like-for-likes grew 1.4 per cent.

The supermarket giant also reported a 28.8 per cent rise in annual pre-tax profits to £1.67 billion.

Statutory revenue came in at £63.9 billion, an 11.2 per cent year-on-year growth, while statutory operating profit was £2.15 billion – a 17.1 per cent year-on-year uptick.

“After four years we have met or are about to meet the vast majority of our turnaround goals,” Lewis said.

“I’m very confident that we will complete the journey in 2019/20.

“I’m delighted with the broad-based improvement across the business. We have restored our competitiveness for customers – including through the introduction of ‘Exclusively at Tesco’ – and rebuilt a sustainable base of profitability.

“I’m pleased that we are able to accelerate the recovery in the dividend as a result of our continued capital discipline and strong improvement in cash profitability.”

The group issued a final dividend of 4.1p, giving a full-year return of 5.77p per share.

Tesco said its annual profit margin of 3.45 per cent represented “clear progress” and put it “comfortably in the aspirational range” that Lewis set four years ago.

The results come at a difficult time for the retail sector as consumer confidence takes a knock from Brexit worries and supermarkets battling rising costs and fierce competition.

As part of efforts to meet the challenges, Tesco invested £3.7 billion to acquire wholesaler and convenience store operator Booker and launched Jack’s, a discount chain that aims to challenge Aldi and Lidl.

However, in January Tesco announces that up to 9000 jobs were at risk across its head office and stores as part of a major cost-cutting drive.

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