In the six months to August, Tesco said it “outperformed” the grocery sector but also flagged that the sales surge could now start to “fall away”. However, this would still mean stronger profits growth this year than was first thought, a Tesco statement said.
The industry-wide impact of supply chain problems also seemed less severe. Ken Murphy, chief executive of Tesco, said: “With various different challenges currently affecting the industry, the resilience of our supply chain and the depth of our supplier partnerships has once again been shown to be a key asset.”
He also noted that, on a conference call with journalists, that there “will be bumps in the road in the run-up to Christmas. We’re seeing our share of challenges”. Nevertheless, Mr Murphy said Tesco was “in good shape for Christmas”, adding that he believed the company’s resilience was due to its “long-standing partnerships with suppliers”.
Group revenues jumped by 5.9% to £30.4bn for the six months, compared with the same period last year. Operating profits increased by 28% to £1.3bn for the period. Sales in the first six months of Tesco’s financial year rose 2.6% to £27.3bn, while UK like-for-like sales rose 1.2%, having risen 0.5% in the first quarter.
Analysts said Tesco was benefiting from its huge online business, from a pricing strategy that matched the prices of German-owned discounter Aldi on around 650 products and the success of its “Clubcard Prices” loyalty scheme which offered lower prices to members.
Tesco’s share price has risen about 10% so far this year, and jumped 5% in early trading. But the shares have underperformed both Sainsbury’s and Morrisons – the latter on the end of a takeover and the former facing bid speculation. Shares in Morrisons, being taken over by US private equity group Clayton, Dubilier & Rice, are up 60% this year, while Sainsbury’s are up nearly 33%.