Sales at Tesco are up 11.5% and the firm is happy that it has nearly achieved all of its turnaround goals put in place in 2017. However, profits have slumped internationally.
Turnover of £56.9bn sees overall UK and Ireland grow by 2.9%, including 1.7% from Tesco UK and 11.1% from Booker. But elsewhere, the company has tanked. Central Europe LFL sales dropped by 2.3% – partly because of fewer trading days and less general merchandise – while Asia LFL sales plummeted 6.2%, although this is an improvement on Q4.
Group operating profit hit £2,206m, up 34.0%, with the UK and Ireland generating £1,537m, a 45.1% increase, which includes £196m Booker (last year £185m) and £79m synergies, says the company.
Central Europe generated £186m, a 56.3% increase, thanks to significant cost reductions and improved profit mix. Asia turned in £286m, a 4.3% drop, blamed on supplier negotiations concluding and significant restructuring costs.
Tesco Bank, meanwhile, has been a star performer, bringing in 16.6% growth and a profit of £197m. Strong banking performance and one-off contract renewal benefits contributing to a strong balance sheet.
“After four years we have met or are about to meet the vast majority of our turnaround goals,” says Dave Lewis, Chief Executive. “I’m very confident that we will complete the journey in 2019/20.”
Lewis continues: “I’m delighted with the broad-based improvement across the business. We have restored our competitiveness for customers - including through the introduction of ‘Exclusively at Tesco’ - and rebuilt a sustainable base of profitability. The full year margin of 3.45% represents clear progress and the second half level of 3.79%, even before the benefit of Booker, puts us comfortably in the aspirational range we set four years ago.
I’m pleased that we are able to accelerate the recovery in the dividend as a result of our continued capital discipline and strong improvement in cash profitability.”
Part of this turnaround has included adding more than 149,000 new customers to the company, improved brand experience across channels and refreshed Clubcard app in August with Faster Vouchers functionality, which has seen users up 34% year-on-year.