Tesco's first-half profit falls as Murphy era begins

Jump in sales from Covid-19 pandemic outweighed by higher costs, losses at Teso Bank

Photograph:  Nick Ansell/PA Wire

Photograph: Nick Ansell/PA Wire

 

Grocery retailer Tesco on Wednesday reported a 15.6 per cent fall in core profit, with a jump in sales due to the Covid-19 pandemic more than outweighed by higher costs and losses at Tesco Bank.

The group, led since the start of the month by new chief executive Ken Murphy, made operating profit before one-off items of £1.037 billion in the 26 weeks to August 29th, down from £1.229 billion in the same period last year.

However, the group forecast that retail operating profit in the full 2020-21 would be at least the same level as 2019-20 on a continuing operations basis.

UK like-for-like sales rose 7.6 per cent in the first half, having been up 8.7 per cent in the first quarter, while the response to the pandemic led to £533 million of costs.

Tesco Bank made a loss of £155 million and a loss of £175-200 million is still expected for the full year. Mr Murphy, formerly at healthcare group Walgreens Boots Alliance, succeeded Dave Lewis, who in his six years at the helm put Tesco back on track after an accounting scandal and refocused the group on its home market.

But Tesco still faces major challenges, most notably the long-term impact of the pandemic, a recession and disruption when Britain’s Brexit transition period finishes at the end of 2020.

Shares in Tesco, which has a 27 per cent share of Britain’s grocery market, went sideways during Mr Lewis’ tenure and last week the group briefly lost its position as Britain’s most valuable food retailer to online specialist Ocado.

The group also named Tate & Lyle’s Imran Nawaz as its new finance chief. He will succeed Alan Stewart who is retiring in April.– Reuters