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Tesco profits fall despite sales surge in UK Tesco could stockpile food after Christmas to prepare for no-deal Brexit
(about 5 hours later)
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. Tesco is set to take action after Christmas to fend off food shortages unless the government has cut a Brexit deal that ensures the free flow of goods from Europe.
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. Dave Lewis, the chief executive of the UK’s biggest supermarket chain, said consumer confidence had already been affected by uncertainty about the details of the country’s new relationship with the EU, prompting Tesco to cut prices and expand its range of cheap foods to tempt shoppers in.
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. But he said the “biggest single challenge” would be the impact of a no-deal exit on deliveries of fresh food from the continent. “The possibility of stockpiling fresh food is very, very limited,” he said.
He said Tesco was discussing contingency plans with its suppliers and “if it came to it, we could take stockpiling of dry goods”, but he said plans would not “become real” until after the busy Christmas trading period. “It really is still wait and see,” he said.
Lewis’s comments came as he announced that Tesco had increased its UK sales at the fastest pace in at least a decade, boosted by strong growth at its new Booker wholesale chain.
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 access to Tesco’s distribution network, enabling it to improve deliveries to its independent retail clients.
Lewis 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.”
Head office Welwyn Garden CityChief executive Dave LewisStores 6,809 worldwide/3,400 UKEmployees 460,000/310,000 UKMarket share 27.6%Annual sales £51bnProfit last year £1.3bnShopper visits a week 79m (worldwide)Head office Welwyn Garden CityChief executive Dave LewisStores 6,809 worldwide/3,400 UKEmployees 460,000/310,000 UKMarket share 27.6%Annual sales £51bnProfit last year £1.3bnShopper visits a week 79m (worldwide)
Head office LondonChief executive Mike CoupeStores 1,414 grocers (+ 800 Argos)Employees 195,000Market share 15.8%Annual sales £29bnProfit last year £503mShopper visits a week 26mHead office LondonChief executive Mike CoupeStores 1,414 grocers (+ 800 Argos)Employees 195,000Market share 15.8%Annual sales £29bnProfit last year £503mShopper visits a week 26m
Head office LeedsChief executive Roger BurnleyStores 642Employees 165,000Market share 15.6%Annual sales £22bn (2016)Profit last year n/aShopper visits a week 18mHead office LeedsChief executive Roger BurnleyStores 642Employees 165,000Market share 15.6%Annual sales £22bn (2016)Profit last year n/aShopper 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. He said trading was going well at its two 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.
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. But shares in the UK’s biggest retail group closed down 8.5.% at 215p, after problems at its Thai and Polish operations meant that operating profits over the first half fell about £45m short of expectations, at £933m.
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.” 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 the issue of government welfare vouchers which cannot be spent in its supermarkets.
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. In Poland, Tesco closed 18 loss-making stores and said it would close at least a further 13 as it struggled to reduce costs after new laws stopped retailers trading on some Sundays.
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. Lewis hinted that Tesco would consider selling off the Polish business if it remained in the red. He said the company’s view of all of its assets was “if we can’t make value you’ve got to find someone who can”.
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.Total sales at the group rose nearly 13% to £28.3bn. Pretax profits rose 2% to £564m.
TescoTesco
SupermarketsSupermarkets
Retail industryRetail industry
Poland Europe
Thailand Brexit
Asia Pacific
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