Shares in Tesco edged higher on Wednesday as it announced reduced inflationary pressures boosted sales in the last financial year.
At 290p, Tesco’s share price was last trading 0.9% higher in midweek business.
Sales at Britain’s largest retailer rose 7.2% during the 12 months to February, to £61.5 billion. Adjusted operating profit jumped 12.8% year on year to £2.8 billion.
Tesco noted that “the impact of inflation was evident across all markets, although [it] reduced gradually across the year as many global commodity prices fell and we passed savings on to customers by cutting prices across everyday grocery lines.
The FTSE 100 grocer said it cut prices on 4,000 products last year and by an average of 12%.
It described customer demand as “resilient,” and noted that volumes improved as the year progressed.
Like-For-Like Sales Rise
On a like-for-like basis, retail sales rose 6.8% year on year. This was driven by a 7.7% improvement at Tesco’s core UK and Ireland division. Adjusted operating profit at its retail unit improved 11%.
At group level, adjusted operating margin improved 25 basis points, to 4.1%. In the UK and Ireland this improved 42 basis points, to 4.2%.
Net debt fell to £9.8 billion from £10.5 billion in the previous year. This supported an 11% increase in the full-year dividend, to 12.1p per share.
Tesco also announced plans to repurchase £1 billion worth of its shares in financial 2025.
Price Cuts Pay Off
Chief executive Ken Murphy commented that “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.”
He said that while inflationary pressures have “lessened substantially,” he added that “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.”
Looking ahead, the FTSE firm said it expected to record retail adjusted operating profit of “at least” £2.8 billion this year.
“Good Set Of Results”
Analyst Garry White of Charles Stanley said that “this was a good set of results from Tesco, with profits in line with raised guidance from January this year after solid trading over Christmas.”
Noting a “welcome return to volume growth in the second half of the year,” he noted that the business enjoyed “overall gains in both value and volume share as it continued to benefit from customers switching from premium retailers such as Ocado and Markets & Spencer.”
Sales across the grocer’s Tesco Finest premium range surpassed £2 billion for the first time last year.
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