Supermarket giant Tesco today reported group sales of £41.8 billion for the year 2005/6, up 13.2 percent. The retailer saw gains across the board, with group revenues up 13 percent to £38.3 billion and underlying profit up 16.9 percent to £2.2 billion. The company exceeded its target for return on capital two years early, realizing a return of 12.8 percent. A new target has been set.
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Meanwhile, the retailer said that £5 billion from its property portfolio would be released, and £1.5 billion of this amount would be used to buy back shares, while the majority will be used to finance future growth. The retailer also added that it had made good progress in all parts of its four-part strategy, although it admitted that it had been a challenging year.
Sales in its domestic market, however, slowed. Like-for-like sales in the UK fell in the last quarter to 4.9 percent, compared with 5.7 percent over the Christmas period. Tesco chief executive Sir Terry Leahy admitted that it had been a challenging year for the company and limited himself to “prudent” forecasts for like-for-like sales growth of between 3 and 4 percent. “Of course we’ll try to beat that, but that’s what we plan for. You know consumers are slightly cautious, competitors are slightly stronger,” he told the FT.
UK sales increased 10.7 percent to £32.7 billion, with like-for-like sales up 7.5 percent and operating profit up nearly 15 percent to £1.8 billion. Meanwhile, international sales, which account for 22 percent of total group sales, rose 23 percent to £9.16 billion while operating profit increased 17.4 percent.
Sales from Tesco.com rose almost 32 percent to the £1 billion mark, with a profit gain of 55 percent to £56.2 million. With more than 200,000 orders a week, it accounts for more than 3 percent of UK sales. “These results represent good progress across the group in a more challenging year,” said Leahy in a statement. “By investing to improve the shopping experience for customers in our businesses around the world, we have been able to deliver another strong sales performance, manage the impact of higher oil-related and other external costs and improve returns for shareholders.”