In the 26 weeks to August 28, Tesco reported a 107% surge in pre-tax profit to £1.1 billion while the retailer’s operating profit grew 17% to £1.4 billion. Tesco attributed the growth to higher sales and lower COVID-19 costs. Sales during the period grew 3% to £27 billion. Like-for-like sales in the UK and Ireland were up 2.4% and 9.1% on a one-year and a two-year basis respectively.
Tesco has increased its outlook and expects retail operating profit for the full year to be between £2.5 billion and £2.6 billion.
Mintel comment:
“A very decent set of results from Tesco. In particular it is the Q2 numbers (three months to 28 August) which stand out, with sales up 2.0% on a one year like-for-like basis and 8.5% on a two-year basis. In-home demand does remain heightened, in the same period reported here by Tesco the ONS has grocery sales up 1.1% against 2020 and 5.9% against 2019. However on this basis Tesco has outperformed the market, with the work it has done on value across the last 18 months, with Aldi Price Match and Clubcard Prices, clearly feeding through to customers.
The details on channel are also particularly notable. In Q2 online sales were down 13.5%, far ahead of the 1.8% decline being shown in the online grocery numbers from the ONS. However at the same time large store sales were up 6.9%, an outperformance in the market, while convenience continued to also be in decline (1.7%). This indicates that Tesco has been more successful than others in encouraging shoppers back to the big store format, and this is having a positive knock-on impact for GM (+2.0% in Q2) and ultimately the bottom line, with Tesco raising its profit guidance for the full year. So overall an impressive first half from the market leader, and with the work Tesco has done on value it sets the business up for a positive Christmas period as well.”
