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Author Felicity Anderson
Britons largest retailer has announced a return to profit, stating that it will also resume dividend payments for shareholders, further signalling improved fortunes.
According to Yahoo, Tesco boss Dave Lewis hailed, “strong progress” as the firm divulged its steep rise in first-half profits to £562m amid tough market conditions.
Rising inflation and fierce competition
Rising inflation and import costs since last year’s Brexit vote, plus fierce competition from discount German supermarkets Aldi and Lidl, saw the retailer battle to keep prices low while boosting sales.
The hard work appears to have paid off, resulting in a rise in pre-tax profits of, “nearly eight times the £71m reported in the same period last year, “ reported The Week.
Tesco told Sky News:
“Market conditions have been challenging with inflationary pressure being felt throughout the half, but we have worked hard with our supplier partners to minimise price increases for customers.
“Our overall sales inflation in the half was around 1% less than the rest of the market, helping us become even more competitive.”
How has Tesco boosted profits?
Revenues grew by 3.7 percent to £28.3 billion over the period, with Yahoo reporting that customers were attracted to Tesco stores by the “lowest level of food price inflation… amongst peers” operating in the UK.
It writes that
“For each £1 worth of sales, Tesco made 2.7p worth of profit during the period, up from 2.2p in the same period a year ago. That demonstrates clearly that Tesco is becoming more efficient.”
ETX Capital analyst Neil Wilson told the news site that Tesco’s drive to keep down prices was giving the company “an edge over the other big players in terms of coping with discounters,” such as Aldi and Lidl.
“At the same time, it’s making big strides in reducing its own operating costs,” he said.
A return to shareholder dividends
A sure sign of economic recovery is that the supermarket will resume paying dividends for the first time since 2014 when it reportedly overstated its half-year profits by an estimated £250m.
Following the alleged incident, which currently sees three former Tesco executives on trial for, “cooking the books,” current CEO, David Lewis was brought in to replace Philip Clarke, and oversee a drastic restructuring of the firm.
Speaking to Sky News, Hargreaves Lansdown analyst, Laith Khalaf, said there were not,
“many things more telling about the health of a company than its ability to pay a dividend, and Tesco’s return to the register after a three-year hiatus speaks volumes about the progress the company has made.”
The good news comes as Tesco awaits the findings of an investigation probe by the Competition and Markets Authority into its planned £3.7bn takeover of wholesale giant Booker.
Today the Independent reports that Wholesaler Booker said it expected its £3.7bn pound takeover by Tesco,“ to complete early next year,” subject to necessary shareholder approvals, among other things.