UK National News - Tesco reports profits rise

20 September 2005

Tesco reports profits rise

Britain’s leading supermarket group, Tesco, has reported an 18.7% rise in profits in their first-half sales figures.

The supermarket giant saw pre-tax profits rise to £908 million for the 24 weeks to August 13, beating average forecasts of £886 million.

The group also reported a rise in sales of 14.1% to £18.8 billion, with same-store sales increasing by 8.2%.

However, while Tesco remained confident of further progress in the second half of 2005, chief executive Terry Leahy warned that the rising cost of oil could have an impact. He said: “The accumulating effects of rising oil-related costs, both on consumer confidence and on our business, are a cause for concern.”

Tesco said that current oil prices could push actual costs as much as £60 million over budget for the full year.

Tesco has managed to avoid the impact of the consumer spending slowdown, which has affected many High Street retailers this year.

The supermarket chain has continued to dominate the UK supermarket industry with a 30.5% share of the market, far ahead of its nearest rival Asda, which has a 16.7% share. Tesco currently receives £1 of every £8 spent by British shoppers.

The group’s non-food ranges have helped contribute to its continuing success. The group saw home entertainment sales increase by 17% in the first half of 2005, while consumer electronics also increased by 20%. Health and beauty products were also boosted by an 11% increase in sales. The success of Tesco’s on-food ranges has helped them to take some of the market share away from specialist retailers, such as Boots and HMV.

Tesco has also announced plans to create more new jobs, following the publication of the latest figures. The firm announced plans to create 7,500 new jobs in the UK.

However, Mr Leahy quashed rumours that Tesco was planning to bid for US group Albertsons. He told the BBC that Tesco had “no interest” in Albertsons as a company.

The publication of the figures has once again raised concerns about Tesco’s share of the supermarket sector in the UK.

Environmental group Friends of the Earth called for an investigation to curb Tesco’s potential “monopoly”, echoing last month’s call for a government investigation into Tesco’s domination of Britain’s supermarket industry by rivals, Asda.

The Forum of Private Business also warned that small firms and suppliers were being affected by Tesco’s continued rising profits.

(KMcA)