You’ve been Tesco’d

From yesterdays Guardian, which is being sued by the monopoly over allegations about tax dodging:

The Tesco supermarket juggernaut today unveiled record profits of £2.8bn, said the new year had started strongly despite the economic downturn and insisted its new business on the west coast of the US was producing “a promising early performance”.

The UK’s biggest retailer posted earnings bang in line with City analysts’ expectations, with underlying profit up 11.8%. Group sales were ahead 11.1% at nearly £52bn.

Chief executive Sir Terry Leahy said: “The breadth of the group and the strength of our business model have enabled Tesco to deliver another year of double-digit sales, profit and earnings-per-share growth, in challenging market conditions”.

The giant retailer, which takes more than £1 of every £8 spent on the UK high street, said the trading outlook was “not all gloom” for value-focused retailers such as Tesco, which could “grow market share in this environment”. It said it intended to “trade the business harder to give what help we can to families whose budgets have become increasingly stretched by higher interest rates, fuel costs and taxes”.

In recent months, Tesco has been under unusual pressure, with suggestions that its usually smooth-running operations have hit some bumps. But the supermarket group said its entire strategy was delivering “good progress”.

In the UK over the past year, the group said it had been faced with “unseasonal summer weather, recovering competitors and a deteriorating non-food market”. Nevertheless, it reported total sales up 6.7%, with higher customer numbers and a higher spend per visit.

However, non-food sales, which generate higher profits, have been under pressure. Non-food sales grew 9% to £8.3bn and growth slowed to 8% in the second half. Entertainment, health and beauty and consumer electronics were strong sellers, but clothing sales growth slowed to just 6% over the year, substantially less than half the growth rates of recent years.

The company said its Tesco Direct operation, launched to take on the Argos catalogue operation, was hitting targets.

The chain opened 120 new outlets in the UK last year, bringing the total number of stores to 1,608.

Tesco is under pressure from improving rivals. Sainsbury recently revealed a 4.6% increase in fourth-quarter like-for-like sales, while new market research data shows Wm Morrison is growing faster than major rivals and Asda is increasing its market share.

Tesco, which has nearly a third of the UK grocery market, broke with tradition today and provided an update on its most recent trading, saying like-for-like sales, excluding petrol, in the first five weeks were ahead “over 4%”. Inflation accounted for 1.5% of that increase, down from 2% in the final quarter of last year.

“There is inflation but it is more muted than the general headlines would suggest,” Leahy told Reuters. [Emphasis added]

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