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Retail Viewpoint – Tesco

Tesco profits skyrocket as the UK’s biggest retailer delivers ninth consecutive quarter of growth

Tesco released glowing preliminary results for FY2017/18 this morning, smashing forecasts with a whopping pre-tax profit leap of 795.2% to £1,298m on a poor comparative of £145m – indicating that the grocer has successfully fought intense competition from both discounters Lidl and Aldi and has seemingly shrugged off macro-economic issues that have affected the majority of UK retailers.

And while this pre-tax profit leap may be a singular event, all other KPIs suggest that Tesco is on track to keep the top position in the convenience market. The increase in operating profit before exceptional items drove a 6.1% boost in share price this morning, and the company announcing a 3p per share dividend – the first since 2014.

Tesco boss Dave Lewis will be particularly pleased with the tangible success of the Group’s UK division as l-f-l sales increased 2.2%, supported by a stronger performance in the second half of 2017, based on consistent growth in fresh food, own-brand products and adding an additional 260,000 customers. This certainly supports Tesco’s claim of a strengthening in own-brand sales and improvements in both quality and value – and, coupled with the forecast £200m per annum synergistic savings from the £3.7bn Booker merger, Tesco looks well placed to maintain its position as the formidable force in UK retail and weather future troubles that may extinguish other household names.

Source: GlobalData 18 April 2018

April 2018

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