Tesco’s profit surges as lower prices draw in consumers

Britain’s biggest supermarket, Tesco, has traded in line with raised expectations, posting a total operating profit of £2.8bn for the full year. 

This morning, chief Ken Murphy thanked a slew of price cut schemes for the lift, which saw profit exceed the board’s expectations by £50m last year. 

Group sales were up 7.4 per cent year-on-year to £61.5bn, while adjusted operating profit for retail grew 11 per cent to £2.8bn. 

Overall adjusted operating profit, which included the contribution from Tesco Bank rose 12.8 per cent to £2.8bn.

Off the back of this growth Tesco hiked its full-year dividend per share by 11 per cent to 12.1p. It also said it would buyback £1bn worth of shares, partially funded by the £600m sale of its banking arm.

Tesco – which commands a 27 per cent share of the UK’s grocery market – has come under pressure from German discounters Aldi and Lidl in recent years.

To compete, the firm said it cut prices on more than 4,000 products and doubled down on its Aldi Price Match scheme, Low Everyday Prices and Clubcard Prices.  

Despite food inflation falling, customers have continued to remain savvy when they shop. 

Tesco said during the year the use of shoppers using its clubcard scheme grew 6.2 per cent to over 22 million households. 

Ken Murphy said: “This strong performance reflects the hard work of colleagues across the whole Tesco Group, and their commitment to serving our customers.  Customers are choosing to shop more at Tesco, which is reflected in growing market share as they respond to the improvements we’ve made to the value and quality of our products. 

“Inflationary pressures have lessened substantially, however we are conscious that things are still difficult for many customers, so we have worked hard to reduce prices and have now been the cheapest full-line grocer for well over a year. “

He added: “We have continued to invest in helping customers where it matters most, cutting prices on more than 4,000 products and doubling down on our powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices. 

“Customer perception of the quality of our products is growing ahead of the market and we continue to win customers from premium retailers, with sales of Tesco Finest now exceeding £2bn.”