Tesco posts positive like-for-like sales growth across regions

In the first half of this fiscal, Tesco Group sales grew by 1.3 percent at constant exchange rates with positive like-for-like sales growth in all regions. At actual exchange rates, sales grew by 3.3 percent including a 2 percent foreign exchange translation effect principally due to the strength of European currencies relative to Sterling. The company delivered positive like-for-like sales growth in the combined UK & ROI business since 2010/11, driven by sustained volume growth in both markets.

Commenting on the company’s first half trading, Dave Lewis, Chief Executive said, "We have made further strong progress in the first half, with positive like-for-like sales growth across all parts of the Group as we re-invest in our customer offer whilst rebuilding profitability in a sustainable way. Whilst the market is uncertain, we have made significant progress against the priorities we set out two years ago, stabilising the business and positioning us well for the future.”

Reports like-for-like growth across regions

In the UK, like-for-like sales grew by 0.6 percent and, including a small contribution from net new store openings, total sales grew by 0.7 percent. All formats – including its largest, extra format – saw an improving trend in like-for-like sales performance throughout the half.

The company said that in a market that remains highly competitive, like-for-like sales in the Republic of Ireland grew 0.2 percent. While top-line growth in value terms was held back by continued investment in lower prices, Tesco managed to retain the leading position in the market in volume terms. International sales grew by 3.2 percent at constant exchange rates, including a net positive contribution from new store openings in Asia which offset the impact of store closures in Europe. Like-for-like sales grew by 2.6 percent overall with positive growth in both Europe and Asia. Its business in Thailand delivered a strong performance, driven principally by improvements in fresh food offer.

Group operating profit before exceptional items was 596 million pounds (756 million dollars), up 56.7 percent at constant exchange rates. UK & ROI operating profit before exceptional items was 389 million pounds (493 million dollars), with a margin improvement of 23 basis points on the second half of 2015/16. International operating profit before exceptional items decreased by 9.8 percent at constant exchange rates to 118 million pounds (149 million dollars), largely driven by continuing investments in customer offer and an intensely competitive environment, particularly in Poland and the Czech Republic.

Diluted earnings per share before exceptional items were 3.16p, which the company said were higher than last year due to improved underlying profitability. Diluted earnings per share before exceptional items and net pension finance costs were 3.74p and were also significantly higher than last year. Statutory diluted earnings per share were 0.42p, down 30 percent, due to a higher level of exceptional items this year.

Plans cost cutting measure to improve operating margin

While Tesco expects the market to remain challenging and uncertain, the company has set a goal of delivering a Group operating margin of between 3.5 percent and 4 percent by our 2019/20 financial year.

This ambition, the company said, is underpinned by six strategic drivers including the identification of 1.5 billion pounds (1.9 billion dollars) further operating cost reductions which we will secure over the next three years. Alongside these cost reductions, Tesco plans to further differentiate the brand, continue our focus on strong cash generation, maximise the margin mix from its sales, maximise the value of its property portfolio and continue to innovate.

Picture:Tesco