Major grocery retailer Tesco has reported an increase in half-year profits thanks to a strong performance in Asia and the US, despite slowing sales growth in Europe and a loss in its domestic UK market.
In its results for the 26 weeks to 27 August 2011, the UK-based business recorded group sales of £35.5bn, a rise of 8.8 per cent compared with the first half of 2010 and a 7.8 per cent increase excluding fuel.
Group profit before tax during the period rose by 12.1 per cent to almost £1.9bn, principally driven by the company’s performance in Asia, where like-for-like sales were up by 3.8 per cent, and the US, where sales grew by 11.7 per cent.
Particularly notable was Tesco’s sales growth in China, where it experienced a like-for-like increase of 6.2 per cent through expansion in second and third tier cities.
The company’s Fresh & Easy subsidiary in the US continued to make an overall trading loss of 23 per cent during the half-year, although Tesco forecasts the business will break even by the end of 2012 or 2013.
Despite substantial sales growth in Slovakia (7.8 per cent) and Turkey (4.4 per cent), Tesco’s European sales excluding the UK only increased by 1 per cent during the half year, with like-for-like growth down by 3.4 per cent in Ireland and 0.4 per cent in Poland.
Like-for-like sales in Tesco’s core UK market, excluding fuel and VAT, fared little better, falling by 0.5 per cent in the six month period and by 0.9 per cent during the second quarter of the year.
To counter “subdued demand” in the UK, Tesco last week launched its Price Drop initiative, under which it said it would reduce the prices of more than 3,000 products, including fruits and vegetables.
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