Tesco has said it expects profit to remain flat for the current fiscal year after reporting a drop in profits for the 12 months ending 25 February 2023.
For the last financial year, pre-tax profit fell sharply by 50.8% year-on-year to £1bn, while net profit was down 50.6% to £753m. Overall profits were hurt by a £982m write-down on the value of its properties as well as £138m in restructuring costs.
However, adjusted operating profit was down by a more modest 7.1% to £2.6bn, while sales (excl. fuel) rose by 5.3% to £57.7bn.
In the core UK market, like-for-like sales rose by 3.3% to £41bn, while the group’s operations in Ireland also saw a 3.3% rise to £2.65bn. Booker recorded a 12% jump to £8.7bn, while sales in Central Europe grew by 10.4% to £4.2bn.
Food sales in the UK grew by 4.6% for the year, with own label growth of 46bps. However, non-food sales declined by 4.5% due to a 6.4% drop in Home sales and a 1.2% slide in Clothing. The group’s UK large stores reported a 4% rise in sales, while convenience stores registered a 6.4% increase, and online sales were up 5.4%.
Sales in Ireland was boosted by a “a particularly strong Christmas”, with Tesco seeing its market share grow to 22.9%. Booker was boosted by strong growth in its Catering division (LFL +26.7%) and a strong showing in its Retail division (LFL +9.9%), which offset a 5.6% decline in Tobacco. Finally, food sales in Central Europe grew by 11.9%, helped by demand for both fresh and packaged categories.
CEO Ken Murphy noted: “It’s been an incredibly tough year for many of our customers … Our results reflect our continued investment in delivering great value and quality for our customers … This is despite unprecedented levels of inflation in the prices we have paid our suppliers for their products, and the cost of running our own operations.”
He added that Tesco expects inflation to ease through the year, with full-year adjusted profit for the fiscal year ending 2024 expected to be “broadly flat”.
Murphy noted that the group was not afraid to have “direct conversations” about delivering value for its customers. He said: “We’ve worked closely with our suppliers to provide them with the support they need at this critical time. However, at a time when we have been focused on mitigating the impact of inflation, we also haven’t been afraid to have direct conversations when necessary in the interest of our customers.”
NAM Implications:
- Key is a favourable assessment by the City.
- And the shoppers will appreciate the money-saving initiatives…
- However, suppliers need to ensure that they achieve and maintain their fair share of Tesco business…
- …by region and category.
- Meanwhile, rivals have a marker re their own performance.
