Tesco PLC (LSE: TSCO) reported in its preliminary results today that sales volumes in the UK and Ireland have surged, thanks to reduced inflationary pressures. However, the company anticipates only a modest increase in profits for the current year.
The group’s sales, excluding VAT and fuel, climbed to £61.5 billion, a 7.4% increase from the previous year, or a 7.2% increase when adjusted for constant currency rates.
There was a notable rise in adjusted retail operating profit, up by 18.8% to £2.76 billion, and the dividend per share also grew by 11% to 12.1p.
During this period, Tesco sold most of its banking operations to Barclays. The remaining services, which include insurance and money services, saw a significant 213% increase in operating profit, reaching £69 million. Consequently, the group’s operating profit amounted to £2.82 billion.
Ken Murphy, the Chief Executive, noted, “With a significant reduction in inflationary pressures, we’re still aware of the ongoing challenges faced by many customers. We’ve been actively lowering prices, and for over a year now, we’ve consistently been the most affordable full-line grocer.”
Tesco is also investing in AI technology to improve operational efficiency. This includes a new tool for optimizing product selection automatically based on store location and customer demographics.
Looking ahead to the 2024/25 financial year, Tesco anticipates a retail adjusted operating profit of “at least £2.8 billion” and an estimated total adjusted operating profit of around £80 million from the remaining Tesco Bank business.
The company also plans to add about 2,000 new UK jobs across its new stores and in technology and online divisions.
Additionally, Tesco announced a further £1 billion share buyback programme, which will be partially financed by a special dividend resulting from the disposal of Tesco Bank.
Unite slams Tesco’s profits
A leading trade union in the UK has expressed disapproval of Tesco’s impressive financial results announced today, accusing the supermarket chain of excessive profit-making.
Sharon Graham, the General Secretary of Unite, stated:
“Tesco is amassing significant profits as families grapple with the challenge of affording basic groceries due to exorbitant prices. Several businesses are exploiting the cost-of-living crisis to seize unwarranted profits.
“Our economy is witnessing widespread profiteering. The government has been notably absent and ineffective in addressing this issue.”
