Tesco 'outperforms market' as sales and profits jump: Edinburgh bank back in black
Tesco has hiked its profit targets for the year on the back of "strong" half-year sales and unveiled plans to hand some £500 million back to shareholders.
Britain’s biggest retailer hailed a robust performance as it reported that both sales and profits grew more than expected in the six months to August.
It said the "resilience of our supply chain" has proved to be a key asset in helping guide the supermarket giant through a raft of challenges hitting the sector.
Tesco lifted its adjusted operating profit target for the year to between £2.5 billion and £2.6bn as a result of the solid half-year outcome, as it said it had "outperformed" its competition.
Profits were boosted by strong sales but the group said it expects some of its recent elevated sales will "fall away" over the rest of the year.
Group revenues jumped by 5.9 per cent to £30.4bn for the latest six-month period, compared with the same period last year. Operating profits jumped 28 per cent to £1.3bn while the Edinburgh-based Tesco Bank operation returned to profit.
The group also launched a share buyback scheme which it said will see it buy £500m of shares back from investors.
Tesco also took a £193m hit from settling claims relating to its misstatement of profits in 2014.
Chief executive Ken Murphy told investors: "We've had a strong six months, sales and profit have grown ahead of expectations, and we've outperformed the market.
"I'm really pleased with our progress as we increased customer satisfaction and grew market share leading to a strong financial performance.
"With various different challenges currently affecting the industry, the resilience of our supply chain and the depth of our supplier partnerships has once again been shown to be a key asset."
John Moore, senior investment manager at wealth management firm Brewin Dolphin, said: “Rather than consolidate after a period of good trading, Tesco has come out fighting with a strong set of results for the last six months and a new strategy for the years ahead.
“The plans for further cost discipline, an enhanced customer offering, investment in its operations, and shareholder returns provide a positive direction for the company following its restructuring in recent years.”
Richard Hunter, head of markets at Interactive Investor, said: “Investors are dancing in the aisles as a profit upgrade and an ever-strengthening balance sheet provide reasons for cheer.
“Tesco is a cash generating behemoth which, along with the recent sale of its Asian unit, has boosted its financial position further.
“The trading numbers across the board are robust, with sales and profits largely driven by an uptick in the performance from retail, and even Tesco Bank has returned to profit having previously been blighted by a substantial bad debt provision.”
Neil Shah, director of research at Edison Group, added: “Looking ahead, the combination of the current driver, labour and fuel shortages as well as increasing inflation could represent something of a perfect storm for the supermarket sector in the build up to Christmas.”