Tesco posts first positive sales growth in seven years

Tesco Group sales grew by 1.1 percent to 49.9 billion pounds (57 billion dollars) at constant exchange rates with positive like-for-like growth in both the UK & ROI and international market for the fiscal year 2016/17. The company said, at actual exchange rates, sales grew by 4.3 percent including a 3.2 percent foreign exchange translation benefit due to the weakness of sterling.

Commenting on the annual results, Dave Lewis, Chief Executive said in the media release, “Today, our prices are lower, our range is simpler and our service and availability have never been better. At the same time, we have increased profits, generated more cash and significantly reduced debt. On top of this, our proposed merger with Booker will bring together two complementary businesses, driving additional value for shareholders by realising substantial synergies and enabling us to access the faster growing ‘out of home’ food market.”

First like-for-like sales growth in seven years

In the UK, volumes grew 1.6 percent and transactions grew 1.7 percent. Tesco saw annual positive like-for-like growth for the first time in seven years and outperformed the market across all categories on a volume basis. In the Republic of Ireland, like-for-like sales, however fell by 0.1 percent as the company continued to invest in lowering prices.

Tesco’s international sales grew by 2.1 percent at constant exchange rates, including a 0.8 percent new store contribution driven by store openings in Thailand which more than offset the impact of store closures, primarily in Europe. The company said, international sales growth weakened in the second half due to an increasingly competitive environment in Europe, particularly Poland, and as Tesco annualised a strong performance last year in Asia. In the year, like-for-like sales grew strongly in Thailand. In Malaysia, top-line sales growth was held back by weak consumer spending across the market and in Central Europe, like-for-like sales grew in all markets apart from Poland which remains intensely competitive.

Group statutory revenue of 55.9 billion pounds (69 billion dollars) including sales of fuel, were stable year-on-year.

Group operating profit up 24.9 percent

Group operating profit before exceptional items was 1,280 million pounds (1,599 million dollars), up 24.9 percent on last year at constant exchange rates and up 29.9 percent at actual rates. Full year UK & ROI operating profit before exceptional items was 803 million pounds (1,003 million dollars), up 60 percent on last year, with margin growth of 68 basis points year-on-year. International operating profit before exceptional items was 320 million pounds (399 million dollars), flat year-on-year at actual exchange rates and down by 12.5 percent at constant exchange rates.

Tesco generated pre-tax net profits of 165 million pounds (206 million dollars) from property transactions in the year, of which 91 million pounds (113 million dollars) related to the sale of the Letnany Shopping Mall and Liberec Forum Shopping Centre in the Czech Republic. The company also sold a number of properties and development sites in the UK & ROI business.

Losses from joint ventures and associates before exceptional items increased by 9 million pounds (11 million dollars) to 30 million pounds (37 million dollars), due to lower profits recognised in the UK property joint ventures. Diluted earnings per share before exceptional items and net pension finance costs were 7.90p, 41 percent higher year-on-year principally due to the company’s stronger profit performance. Statutory basic earnings per share from continuing operations were 0.81p, lower than last year driven by higher net exceptional costs.