Tesco Interims Show 12.8% Rise in Group Sales

Tesco has reported on half-year trading, with group sales of £28.3bn, up 12.8%. 

Headlines:

Group sales³ of £28.3bn, up 12.8%
- UK & ROI LFL sales⁸ up 3.8%, strengthening from 3.5% in 1Q to 4.2% in 2Q
o incl. Tesco UK LFL sales up 2.3% (1Q: 2.1%; 2Q: 2.5%) and Booker LFL sales up 14.7% (1Q: 14.3%; 2Q: 15.1%)
o significant investment in ‘Exclusively at Tesco’ brands; roll-out 81% complete

- Central Europe LFL sales declined by (1.5)% due to impact of Sunday trading regulations
- Asia LFL sales decline reduced from (9.0)% in 1Q to (4.8)% in 2Q following annualisation of bulk-selling impact; Government-issued welfare cards continue to impact sales in Thailand by c.(2)%
- Group operating profit before exceptional items and amortisation of acquired intangibles⁴ up 24.4% to £933m
- UK & ROI profit of £685m, up 47.6%; incl. first-time consolidation of £97m Booker profit and £16m synergies
- Central Europe profit of £59m, down (3.3)% reflecting £9m profit on property-related items in prior year
- Asia profit of £100m, down (29.1)% due to combined impact of sales deleverage, price investment and renegotiation of promotional investment
- Bank profit of £89m, up 6.0% mainly due to increased income and ongoing cost reductions

Further progress against each of our six strategic drivers:

1) Brand health⁹ continues to strengthen; quality perception +3.6 points¹⁰
2) In-year cost savings of £241m; savings of £1.1bn to date towards £1.5bn target
3) Generated £1.1bn of retail operating cash⁶; net debt of £(3.1)bn is after £(766)m Booker cash consideration
4) Improving the mix across geographies, channels and product; focus on sustainable general merchandise categories by closing Tesco Direct; on track to achieve 3.5-4.0% margin ambition¹¹ by 2019/20
5) Released a further £134m value¹² from property; further buyback (Cirencester Extra) announced Sept 2018
6) Innovations including 5,038 of 10,000 own brand products re-launched; eight new ‘Exclusively at Tesco’ brands; launched ‘Jack’s’ as part of celebrating 100 years of great value at Tesco

Dave Lewis, Tesco Chief Executive, said:

“We have made a good start to the year. The step up in Q2 is driven mainly by the UK & ROI and delivers our eleventh consecutive quarter of growth.

"At the same time, we have made further strategic progress. We completed our merger with Booker in March and are delighted with performance so far. We announced a strategic alliance with Carrefour in July which goes live this month. And we are now more than half-way through the biggest own brand re-launch in our nearly 100-year history, including a significant investment in over 300 new ‘Exclusively at Tesco’ products at market-leading prices.

"We are firmly on track to deliver our medium-term ambitions and are continuing to improve the quality and value of our offer for customers in all of our markets. In doing so, we are well-positioned to deliver strong, sustainable returns for shareholders.”

Source : Insight DIY Team and Tesco PLC

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