Tesco announces profit rise and thousands of new jobs

Supermarket giant Tesco has announced an 11.8% increase in annual profits for last year to £2.84 billion which has met with analysts’ forecasts.

Furthermore, the group has announced plans for 30,000 new jobs worldwide, with about 30% planned for the UK.

Group sales at Britain’s largest retailer increased to £51.8 billion, a rise of 11%. The supermarket said prices had risen by about 1.5% across the board, but increases in food prices masked price cuts in non-food items.

Tesco also reported a strong start to the year, with a like-for-like increase of 4% in UK sales, excluding petrol, in the first 5 weeks of 2008.

Other high street retailers have suffered amid the credit squeeze but Tesco remained positive.

Tesco chief executive Terry Leahy said the breadth of the group and the strength of our business model have enabled Tesco to deliver another year of double-digit sales, profit and earnings per share growth in challenging market conditions.

We begin the new financial year confidently with a good start in the UK, excellent progress in our established international markets and promising early performance from our investments in future growth, particularly in the United States, China and Turkey, added Mr Leahy.

Analysts had expected a good performance from Tesco, however they had been concerned about the group’s performance in the US.

Last week, Mike Dennis an analyst at Piper Jaffray, criticised Tesco over its expansion in the United States.

Mr Dennis said poor weekly sales at the supermarket giant’s recently opened Fresh & Easy stores in the west coast of America could be hit by competition from Wal-Mart’s new Marketside stores.

Mr Dennis said Marketside could draw custom away from Fresh & Easy and give Tesco’s US business an unwelcome broadside to its already weak sales and accelerating losses.

Mr Dennis added that together this would mean revenues in the US will be around $600 million this year, just half of the $1.2 billion forecasted.

Late last year, Tesco announced it was to embark on a major expansion of the west coast of America. It opened the first Fresh & Easy Neighbourhood Market in the city of Hemet which is about 75 miles east of Los Angeles.

Tesco is the biggest player in the British grocery market with a 30% share of the market. Asda controls 16.9% of the market, Sainsbury’s has 16.4% while Morrison’s is in fourth place with 11.5%.

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