Recession poses few obstacles for grocery chain

Oct 7 2009 by Iain Laing, The Journal

He said some international markets had been hard hit, but added that these areas would see growth in the long term.

The group generated total sales of more than £1bn a week at £30.4bn including petrol. Underlying profits before tax, which strips out one-off items, was £1.55bn, a rise of 8.6% and slightly ahead of market expectations.

Freddie George, retail research analyst at Seymour Pierce stockbrokers, said the results were better than expected after market consensus had been revised downwards in recent weeks.

“We maintain Tesco Group has a great potential to exploit the opportunities in banking and multi-channels and should see higher returns from its overseas activities, which accounted for 23% of sales in 2008/9 but this could grow to 30% of sales in two years time,” he said.

Tesco has renamed its personal finance business Tesco Bank as it looks to create a “full-service” retail bank for its customers.

The division has suffered from rising bad debts – of £92m – in the aftermath of the financial crisis, but Tesco said its trading profits of £115m in the period marked a “good performance in a challenging retail banking market“.

The firm stepped up its fight for customers by doubling points in its Clubcard loyalty scheme in August and said it was already seeing “encouraging results“.

Tesco said it opened 87 stores in the first half, including its 1,000th Express outlet, which helped the supermarket continue to grow total sales. It is on track to open two million square feet of space this year.