€1.5bn operating profit at Tesco as recovery continues

Tesco sales in Ireland were down 0.1 per cent on last year, according to results on Wednesday.

Performance in Ireland climbed in the first three quarters before falling by 1.3 per cent in the fourth, despite Christmas sales. Revenues in Ireland for the year to February 25th came to €2.48 billion.

Overall, Britain's biggest retailer beat forecasts for full-year profit, showing its recovery is picking up pace in a boost to chief executive Dave Lewis as he seeks investor backing for his plan to buy wholesaler Booker.

The supermarket group said on Wednesday it made an operating profit before exceptional items of £1.28 billion/€1.5 billion in the year to February 25th, 2017.

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That was ahead of analysts’ average forecast of £1.26 billion, according to Reuters data, and an increase of 30 per cent on the £944 million made in 2015-16.

Tesco said UK sales at stores open more than a year rose 0.7 per cent in the 13 weeks to February 25th, its fiscal fourth quarter – a fifth straight quarter of underlying growth.

“We are confident that we can build on this strong performance in the year ahead,” said chief executive Dave Lewis.

Costs cut

By 2020, Lewis wants Tesco to earn between 3.5 pence and 4 pence of operating profit for every £1 spent by shoppers, up from 2.3 pence in 2016-17 as sales rise and £1.5 billion in costs are cut from the business.

The supermarket group needs the results to impress to help it persuade shareholders that it can also make a success of its attempt to buy Booker.

Two of its biggest shareholders last month urged it to drop the £3.7 billion bid, saying it was overpaying and the deal was a distraction from its turnaround plan.

Tesco, shares in which have fallen 5 per cent this year, says it remains committed to a deal it believes will provide a new avenue of growth when its recovery is secured.

Lewis said on Wednesday the proposed merger would drive additional value for shareholders from substantial synergies, and would enable Tesco to access the faster growing “out of home” food market.

– Reuters