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Tesco profits jump 28.8%

Tesco has reported a 28.8% hike in pre-tax profits to £1.7 billion. Revenue increased 11.2% to £63.9 billion, while UK like-for-like sales saw an increase of 2.9%, which included Tesco UK (1.7%) and Booker (11.1%).

Over the 2018/19 financial year, the retailer has made £532 million of cost savings, achieving £1.4 billion of savings towards its £1.5 billion target to date. The retailer said it felt confident despite the uncertain economic and political climate. 

“After four years we have met or are about to meet the vast majority of our turnaround goals.  I’m very confident that we will complete the journey in 2019/20,” said Tesco chief exec, Dave Lewis.

“I’m delighted with the broad-based improvement across the business.  We have restored our competitiveness for customers – including through the introduction of ‘Exclusively at Tesco’ – and rebuilt a sustainable base of profitability. The full year margin of 3.45% represents clear progress and the second half level of 3.79%, even before the benefit of Booker, puts us comfortably in the aspirational range we set four years ago. I’m pleased that we are able to accelerate the recovery in the dividend as a result of our continued capital discipline and strong improvement in cash profitability.”

The retailer reported online grocery sales grew 2.8% year-on-year and featured its most successful Christmas, with 776,000 orders delivering nearly 51 million items.

Tesco also noted the “strong response” from customers to its new Jack’s stores. The retailer opened eight of the discount stores last year which have a net promoter score of 53%.

Last year, the retailer also announced the closure of its online general merchandise business, Tesco Direct, which it said cost the company £38 million which is highlighted under exceptional items in the annual report. This is more than the costs to address miss-sold PPI insurance (£16 million) from the Tesco Bank division. The retailer also details the £16 million fine from the Financial Conduct Authority (FCA) for the cyber attack on Tesco Bank back in 2016 where 9,000 customers were impacted.

Alastair Lockhart, insight director at Savvy, was impressed by the results. “Principally we see a strong financial performance, driven by the turnaround of the core UK grocery business. Innovation is back at the top of the agenda and shoppers are responding well. Exclusively at Tesco has reinforced the retailer’s own brand and has provided valuable differentiation is a competitive market. Finally, the Booker merger is confirmed as a move of strategic genius, delivering financially but also providing critical buying scale, at a time when it now looks unlikely that the Asda / Sainsbury’s merger will proceed.”

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