Tesco has increased its UK sales at the fastest pace in at least a decade, boosted by strong growth at its new Booker wholesale chain.
But shares in the UK’s biggest retail group fell almost 9%, after problems at its Thai and Polish operations meant that operating profits over the first half fell about £45m short of expectations, at £933m.
Investors were spooked as sales at Tesco’s Thai chain fell 7% at established stores and profits tumbled nearly 30% as the company suffered from a change to government welfare vouchers, which can no longer be spent in its supermarkets. It also stopped selling bulky goods.
1) Tesco
Head office Welwyn Garden City
Chief executive Dave Lewis
Stores 6,809 worldwide/3,400 UK
Employees 460,000/310,000 UK
Market share 27.6%
Annual sales £51bn
Profit last year £1.3bn
Shopper visits a week 79m (worldwide)
2) Sainsbury’s
Head office London
Chief executive Mike Coupe
Stores 1,414 grocers (+ 800 Argos)
Employees 195,000
Market share 15.8%
Annual sales £29bn
Profit last year £503m
Shopper visits a week 26m
3) Asda
Head office Leeds
Chief executive Roger Burnley
Stores 642
Employees 165,000
Market share 15.6%
Annual sales £22bn (2016)
Profit last year n/a
Shopper visits a week 18m
In Poland, Tesco closed 18 loss-making stores and said it would close at least a further 13 as it struggled to reduce costs in the business after new laws stopped retailers trading on Sundays.
Tesco’s established stores in the UK and Ireland increased sales by 4.2% in the three months to the end of August, a step up from 3.5% in the previous quarter. Growth at the Tesco chain improved to a healthy 2.5%, but Booker increased sales by just over 15%, partly helped by gaining access to Tesco’s distribution network, which helped it improve deliveries to its independent retail clients.
Dave Lewis, the chief executive, said: “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.”
He said trading was going well at its two new Jack’s discount stores, which opened last month. Two more are due to open on Thursday – in St Helen’s and Edge Hill, near Liverpool.
Lewis said there was uncertainty about the future in the face of Brexit, where the “biggest single challenge” would be the impact of a no-deal exit from the EU on deliveries of fresh food from the continent. “The possibility of stockpiling fresh food is very very limited,” he said.
He said Tesco was looking at contingency plans with its suppliers and “if it came to it, we could take stockpiling of dry goods”, although this would be unlikely until after the busy Christmas trading period. “It really is still wait and see,” he said.
Total sales at the group rose nearly 13% to £28.3bn. Pretax profits rose 2% to £564m.
