Tesco chief executive Sir Terry Leahy claimed Tesco is “at its best in tough markets” as he unveiled an 11.3 per cent first-half pre-tax profit rise this morning.
The UK’s number one supermarket chain reported the more than respectable figures, for the 26 weeks to August 23, despite the over-riding tough retail environment.
UK sales increased by 9.7 per cent to £20.1 billion, against overall group sales growth of 14.1 per cent. International growth (26.8 per cent) has driven total sales to just over £28bn, with profit before tax sitting at £1.435bn for the half.
In the UK, inflation strengthened during the first half, and Tesco said its investment in lowering prices for customers is being “more than offset by the rises in market prices for some commodities and seasonal fresh foods”. Reflecting the general mood of the market, the trading statement also forecasts that inflation will “slowly subside” through the second half.
Food sales have remained solid during the first half, despite emerging evidence of consumers trading down in some product categories to help relieve stretched household budgets.
Sir Terry said Tesco is "at its best in tough markets" when its ability to respond to different consumer demands comes to the fore. "That's why we have been able to make good progress this year, despite facing into powerful economic headwinds and carrying planned start-up losses in the US," he said.
"Our business is strong, broadly-based, increasingly international and, I believe, well-placed not just to cope with the challenges which lie ahead but also to grasp the growth opportunities open to us by continuing to invest in our strategy."
Tesco will be buoyed by the results, as it has taken a knock in the last few months from the discount chains. Its stated objective - to become Britain’s largest discounter - heralded huge price cuts on a new range of some 400 low-cost products last week.
Tesco serves more than 20 million customers every week. "The same number of people are coming, they're just hard up and need to spend a little bit less," Sir Terry said.
Tesco also said its Fresh & Easy stores in the US have already begun to turn things around after a tricky start, with the "average running at $11 per square foot per week which is already substantially higher than the US supermarket industry average".
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