Tesco enjoys surge in half-year profits as sales rise



The retailer said that group operating profit was up 23.7% for the period to £759 million, which chief executive Dave Lewis described as "strong progress".

Tesco's share price was subdued yesterday, shedding 0.27 percent to close at 186.65, underperforming the broader United Kingdom market, with the benchmark FTSE 100 index ending the session in positive territory.

United Kingdom like-for-like sales in the second quarter lifted 2.1%, although this was down slightly on the 2.3% recorded in the previous three months.

"However CEO Dave Lewis will no doubt argue that in a world where Sainsbury's owns Argos, and Morrisons is flirting with Amazon, he needs to push Tesco on to stay ahead of the game".

An interim dividend of 1 pence will be paid which "reflects improved performance and board confidence". Further, Tesco resumed its dividend, for the first time since 2014/15 accounting scandal. In the first half of its current fiscal year, turnover grew 3.3 %, mainly thanks to advantageous exchange rate fluctuations.

United Kingdom like-for-like sales were up 2.2%, which was down from 2.3% in the first quarter and behind some analyst expectations.

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Cost savings helped to push up the group operating margin to 2.7 percent from 2.2 percent previous year.

Khalaf says the additional £15m of annual contributions "is not as bad as it might have been" but says the company's pension valuation has come "at an inauspicious time" due to low bond yields exacerbating the deficit.

Tesco's overall operating margin also up to 2.7 per cent from 2.2 per cent in the same period last year, and the company said it was on track to hit a 3.5 to four per cent ambition in its 2019/20 fiscal year.

He added: "It remains to be seen how much pressure Tesco is passing down the chain of suppliers in this environment (and the company makes no reference to the chicken supply investigation by two national media outlets, even though the 2013 horse meat scandal turned out to be one indication of margin and profit stress at the company)".

Tesco sales return to growth. Last week 2 Sisters suspended operations at the site so it could re-train staff. Media reports suggest that the Competition and Markets Authority (CMA) is expected to give its provisional findings by next month and a final decision by December.

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