Tesco profits up 13% in first half - Food Retailing - Brief Article - Statistical Data Included

Eurofood, Sept 26, 2002

A tough trading climate failed to stop the UK's leading food retailer Tesco delivering a robust set of results for the first half of the year, announcing a 13% rise in pre-tax profits and the creation of 12 000 jobs in its overseas business by the end of the year.

Group sales for the 24-week period ended 10 August 2002 increased by 10.6%

rising from 11.5bn [pounds sterling] (18.5 1bn [euro]) to 12.7bn [pounds sterling]. Pre-tax profits were up 13.3% to 545m [pounds sterling].

Sales in the UK increased by 6.8% to 10.5bn [pounds sterling] compared to 9.8bn [pounds sterling] in the same period last year, of which 3.9% came from existing stores and 2.9% from new stores. Operating profit in its domestic market was 7.2% higher at 537m [pounds sterling] (2001:- 501m [pounds sterling]).

Tesco said despite the concern about a slowing retail market, it has seen a return to "a more normal level" of sales across the industry.

EXCELLENT INTERNATIONAL PROGRESS

Tesco said it was continuing to make "excellent progress" in building a profitable international business of scale in both Europe and Asia. In its international business, Tesco saw sales rise by 32.3% to a value of 2.3bn [pounds sterling]. Its international business contributed some 59m [pounds sterling] to group profits, up 78.8% on last year.

In Continental Europe sales rose by 18.7% to 1.3bn [pounds sterling] up from 1.1bn [pounds sterling] last year, and contributed an operating profit of 36m [pounds sterling] to the group, an increase of 50.0% on last year. Its sales in Asia were up 54.4% to 1.0bn [pounds sterling], generating an operating profit of 23m [pounds sterling].

In the first half of the year, the UK-based firm opened three hypermarkets in Europe and five in Asia. There are plans to open a further 28 hypermarkets in the second half giving Tesco over 150 hypermarkets by the end of the year. Tesco has also recently started trading in Malaysia, and said by 2003/04, it will have more space overseas than in the UK.

THRIVING INTERNET BUSINESS

Its thriving Internet business Tesco.com saw sales grow by 27% in the first half of the year, with profits increasing to 1.9m [pounds sterling].

This excludes start up costs regarding its joint venture with US food retailer Safeway Inc and the online joint venture GroceryWorks.

Its UK online business covers some 95% of the population, and Tesco said it generates around 85 000 orders a week.

Its home shopping businesses in Ireland and Korea are also up and running, enabling Tesco to describe itself as "an international dotcom retailer."

Terry Leahy, chief executive at Tesco said, "The four elements of our strategy remain the same:- a strong UK core, non-food growth, retailing services and international expansion. Our customer focused strategy is bringing value, choice and convenience to 280 million customers every week in 10 countries."

Tesco turnover and operating profit to 10 August 2002
(m [pounds sterling])

                          2002    2001    % /-
Turnover
UK                       9 675   9 064     6.7
Rest of Europe *         1 123     949    18.3
Asia *                     942     611    54.2
Group                   11 740  10 624    10.5

Operating profit
UK                         537     501     7.2
Rest of Europe *            36      24    50.0
Asia *                      23       9   155.6
Goodwill amortisation      (4)     (4)      --
Operating profit           592     530    11.7

Note: * Results for Rest of Europe and Asia are for period ended 30
June 2002, except Ireland which is to 10 August 2002.

Source: Tesco