Tesco interims reflect sluggishness of food sector - Tesco's financial results for the first half of 1998 - Abstract

Eurofood, Oct 8, 1998

Leading UK supermarket group Tesco has reported first-half financial results that reflect the drop in sales growth across the UK food industry. This sluggishness has been caused by a slowdown in consumer expenditure and a decline in inflation. The group has reported interim pre-tax profits up 6% to GBP371 m (ECU538m) on turnover up 7.2% to GBP8.3bn, and said that comparable sales in the first five weeks of the second half of the financial year were 2.5% ahead. Although these results are not dire, they do not compare favourably with results for the same period last year.

Tesco chief executive Terry Leahy said that the group was well prepared to meet the challenge of the temporary slowdown in the industry. While analysts wondered whether Tesco might not have trouble maintaining its number-one spot in the UK supermarket sector, Leahy said that Tesco is opening 22 new stores in the UK this year, which will create 10 000 new jobs. Other measures designed to help stave off competition from its rivals include a stronger focus on non-food products (including clothing, home entertainment and healthcare), further development of the Tesco Personal Finance offering, and considerable expansion abroad.

Foothold in Asia

Among the first UK supermarket groups to establish a presence abroad, Tesco reported that 25 of the stores acquired in Northern Ireland are now already operating as Tesco, with like-for-like sales up 17%. Operations in the Irish Republic were also said to be progressing well. Further afield, Tesco has expanded its eastern European operations and gained a foothold in Thailand, where it has acquired the number-two retail business. Tesco intends to double the number of stores in the south-east Asian country over the next three years

Tesco opens doors in Szeged

Meanwhile, Tesco has opened its fourth supermarket in Hungary. The new store is in the southern city of Szeged and joins two in the Hungarian capital Budapest and a third in Kaposvar. Tesco expects to open four more outlets in Hungary by the end of 1999.