Tesco bucks the trend with steady profits rise

The retail sector has suffered of late as consumers cut back on spending due to the credit crunch. Last week, the CBI’s latest survey of retailers revealed another poor month after retail sales fell for the sixth consecutive month in September.

However, the figures revealed that supermarkets bucked the trend, continuing to experience steady growth.

Supermarket giant Tesco has announced its results today and has reported a pre-tax profit of £1.4 billion in the half-year to August 23, an increase of 11% compared with the same period last year.

Group sales rose 14%, boosted by strong international sales which were up by 27%. Excluding petrol, like-for-like sales were up 3.7% in UK stores.

The results were in line with analysts expectations.

Commenting on the results, Terry Leahy, the group’s chief executive, said the results were good in view of the current tough trading environment.

He added that the business is strong, broadly-based, increasingly international and in a good position not just to cope with the challenges ahead but also to grasp the growth opportunities open to us by continuing to invest in our strategy.

Mr Leahy added that growth in European and Asian markets should carry Tesco through the challenging trading period.

For quite some time now, Tesco, which serves over 20 million customers each week, has monopolised the British grocery market and has a 30% share of the market.

However, as consumers continue to cut back, much cheaper supermarkets such as Lidl, Iceland and Aldi have been eating into Tesco’s market share.

Twelve months ago, Tesco embarked on a major expansion of the west coast of America in order to take on US supermarket giants such as Wal-Mart.

It opened its first US store under its new green and white Fresh & Easy banner in the city of Hemet which is about 75 miles east of Los Angeles last November. The group said it has experienced good sales with the ‘average running at $11 per square foot per week which is already substantially higher than the US supermarket industry average‘.

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