Tesco raised its full-year outlook as it reported a 16.6 per cent rise in first-half core retail profit and increased sales despite labour and supply chain disruption and tough Covid-19 related comparisons a year ago.
The group said on Wednesday its strong first-half performance had enabled it to reduce net debt by £1.7 billion since February, and it would therefore use cash for a share buyback, with the first tranche of £500 million in shares to be bought by October 2022.
Tesco forecast a full-year 2021-22 adjusted retail operating profit of between £2.5bn and £2.6bn, having previously forecast a similar outcome to 2019-20, when it made £2.3bn.
Tesco, which has a 27 per cent share of Britain’s grocery market, made adjusted retail operating profit of £1.38bn in the first half – ahead of analysts’ average forecast of £1.26bn and £1.19bn made in the same period last year.
First-half group sales rose 2.6 per cent to £27.3bn, while UK like-for-like sales rose 1.2 per cent, having risen 0.5 per cent in the first quarter.
“We’ve had a strong six months; sales and profit have grown ahead of expectations, and we’ve outperformed the market,” said Chief Executive Ken Murphy.
“With various different challenges currently affecting the industry, the resilience of our supply chain and the depth of our supplier partnerships has once again been shown to be a key asset,” he said.
Analysts say Tesco is benefiting from its huge online business, from a pricing strategy that matches the prices of discounter Aldi on around 650 products and the success of its “Clubcard Prices” loyalty scheme which offers lower prices to members.
However, Tesco chairman John Allan told ITV last month that supply chain disruption meant food prices could rise by 5 per cent this winter.
Tesco is also paying an interim dividend of 3.2 pence, in line with the prior year.
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