Group sales up 3.3% but profit down 28% due to "one-off" costs
Tesco Plc, the UK's largest retailer, has reported positive trading in the first half of the year with LFL sales increasing 1% across the group, EBITDA increasing 4.5% (£1.45bn), and operating profit increasing 38% (£515m). However, despite the growth in revenue and operating profits, underlying profits fell 28% to £71m.
The company, whose accounting scandal led to the group reporting a record loss last year, said underlying profit had fallen due to one-off costs, but confirmed it was on track to meet full-year expectations (£1.2bn operating profit).
It confirmed that significant progress had been made on all three of its priorities: being competitive in the UK, having a more secure balance sheets, and rebuilding trust in its brand. According to today's update, all key customer metrics have improved relative to the market, net debt has decreased by £800m, and the Group's brand health has reached its highest level in four years.
According to Bloomberg, Tesco's H1 results beat analysts’ estimates and showed that CEO Dave Lewis’ plan to revive Britain’s biggest grocer was gaining traction:
"Operating profit rose 60 percent to 596 million pounds ($759 million) before one-time items, the Welwyn Garden City, England-based company said Wednesday. The median estimate of 15 analysts surveyed by Bloomberg News was for earnings of 523 million pounds."
Mr Lewis said the company had made strong progress in the first half, with positive like-for-like sales growth across all parts of the Group:
"The entire Tesco team is focused on serving shoppers a little better every day. We are more competitive across our offer. Prices are more than 6% lower than two years ago, availability and service have never been better and our range is more compelling. Our new fresh food brands are performing ahead of expectations, improving our value proposition and further removing reasons for customers to shop elsewhere.
Whilst the market is uncertain, we have made significant progress against the priorities we set out two years ago, stabilising the business and positioning us well for the future. Today, we are sharing the plans we have in place to become even more competitive for our customers, even simpler for colleagues and an even better partner for our suppliers, whilst creating long-term, sustainable value for our shareholders."
Tesco shares are up 7.5% this morning, trading on a PER of 55.2, considerably higher than Morrisons (28.4) and Sainsbury's (10.3).