Dave Lewis Tesco

Tesco CEO Dave Lewis

Tesco’s profits have topped £1 billion as the supermarket returned to sales growth for the first time in seven years.

Like-for-like sales at the retailer increased by 0.9 per cent in the UK and by one per cent across the group as a whole. In food like-for-like sales rises were higher, with 1.3 per cent growth in the category.

The supermarket chain also saw profits surge, reporting a 30 per cent leap in group operating profit to £1.28bn in the year to the end of February 2017. Within that the retailer’s UK profits shot up by 60 per cent to £803 million.

The healthy results come ahead of a planned £3.7bn takeover of cash-and-carry group Booker, aimed at accessing the fast-growing ‘out of home’ food market.

Profits were dented slightly by a record finerelated to its 2014 accounting scandal when the retailer overstated its profits. The retailer accepted a £235m charge after agreeing a deferred prosecution with the Serious Fraud Office and the Financial Conduct Authority in March. As a result of the fine Tesco’s full-year pre-tax profit fell from £202m in 2015-16 to £145m in 2016-17.

Tesco CEO Dave Lewis said: “Today, our prices are lower, our range is simpler and our service and availability have never been better.Our exclusive fresh food brands have strengthened our value proposition and our food quality perception is at its highest level for five years. At the same time, we have increased profits, generated more cash and significantly reduced debt.

“We are ahead of where we expected to be at this stage, having made good progress on all six of the strategic drivers we shared in October. We are confident that we can build on this strong performance in the year ahead, making further progress towards our medium-term ambitions.”

The six “strategic drivers” identified by Lewis were brand health; cost savings; the generation of retail operating cash; creating a more efficient mix across channels and products; repurposing and releasing value from property; and innovating to increase food donations and reduce calories in soft drinks.

In March 2016 the retailer invested £300m in seven own-label “farm” brands across fresh produce, meat and poultry in a bid to compete with Aldi and Lidl on price and push the message that its products were fresh and locally sourced by using fictitious British farm names.

Commenting on Tesco's recovery, Martin Lane of financial products comparison site money.co.uk said: 'Tesco are finally recovering from their accounting scandal and slowly regaining the trust of their customers. Their chief exec has promised today that while inflation may mean the cost of food is rising, Tesco will only hike their prices as a last resort.

'I really hope Tesco stay true to this. It would be within their interests too. With Aldi and Lidl showing no signs of slowing down their race to the top, Tesco need to remain competitive in the price wars.'