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Tesco Posts 28% Full-Year Profit Increase, Eyes Further Margin Improvements

Published on Apr 11 2018 7:54 AM in Retail tagged: Featured Post / Tesco / Dave Lewis / Margins

Tesco Posts 28% Full-Year Profit Increase, Eyes Further Margin Improvements

Tesco posted a 28.4% rise in full-year profit on Wednesday, underlining the recovery of Britain's biggest retailer under chief executive Dave Lewis.

The supermarket group, which last month completed the £4 billion purchase of wholesaler Booker, made an operating profit before exceptional items of £1.644 billion in the year to Feb. 24, 2018.

Group sales were up 2.3% to £51.0 billion.

It said it was firmly on track to deliver its medium-term targets which include cutting costs further and improving operating margins to between 3.5 percent and 4.0 percent by 2019/20. It had a margin of 2.9 percent in 2017/18.

'Strong Progress'

“This has been another year of strong progress, with the ninth consecutive quarter of growth. More people are choosing to shop at Tesco and our brand is stronger, as customers recognise improvements in both quality and value," Lewis said in a statement.

"We have further improved profitability, with Group operating margin reaching 3.0% in the second half.  We are generating significant levels of cash and net debt is down by almost £6 billion over the last three years.  All of this puts us firmly on track to deliver our medium-term ambitions and create long-term value for every stakeholder in Tesco."

Turnaround

Lewis joined Tesco in 2014, tasked with turning around a market leader which was battling a fall in sales and profits due to changing shopping habits and the rise of German discounters Aldi and Lidl.

An accounting scandal, uncovered shortly after his arrival, then plunged the group into the worst crisis in its near 100-year history.

Lewis first stabilised Tesco, then got it growing again with a focus on more competitive prices, new and streamlined product ranges, better customer service and much improved supplier relationships.

Bold Move

Buying Booker is the boldest move yet by Lewis, providing Tesco with access to the faster growing catering segment of Britain's 200 billion pound grocery market.

The group, which competes with Sainsbury's, Walmart's Asda and Morrisons, said it was firmly on track to deliver its medium-term targets which include cutting costs further and improving operating margins to between 3.5 percent and 4.0 percent by 2019/20.

It had a margin of 2.9 percent in 2017/18.

Like-for-like sales in its home market were up 2.2 percent for the year, with the key figure up 2.3 percent in the fourth quarter.

The only weakness appeared to be in its Asia division, where it operates in Thailand and Malaysia. Sales there fell by 14 percent in the fourth quarter as it cancelled previous practices of bulk selling and the use of short-term coupons to drive sales.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine. 

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