- Rising UK food inflation hits shoppers
- Shares unaffected in early trading
- Group sales rise 5.3%
Tesco (TSCO) has reported a 50% fall in pre-tax profits for 2022 to £1 billion compared to £2.03 billion in 2021 as the cost-of-living crisis takes hold of the UK’s largest grocer.
Tesco shares seemed to shrug off the bad news in early trading rising over 2% to 273p.
Ken Murphy, Tesco CEO said: ‘It's been an incredibly tough year for many of our customers, and we have been determined to do everything we can to help.
‘Our results reflect our continued investment in delivering great value and quality for our customers, whilst at the same time looking after our colleagues.
‘This is despite unprecedented levels of inflation in the prices we have paid our suppliers for their products, and the cost of running our own operations.’
Murphy however remains upbeat in the long-term as the supermarket group continues to work with food suppliers to mitigate inflation ‘as much as possible’ as well as delivering to shareholders a proposed final dividend of 7.05p per share to take the full year dividend to 10.90p (in line with last year's full year dividend).
THREAT FROM DISCOUNTERS
Despite Murphy being upbeat about the supermarket group, there is no hiding the fact that runaway UK inflation in the second half of last year has caused shoppers to rethink what items they are buying for their weekly shop and where they are buying it.
Retail data provider Kantar revealed in March that grocery price inflation climbed again to reach 17.5% over the four weeks to 19 March 2023 - a new record. This means that households face spending an extra £837 on their supermarket bills for the year if they don’t change their shopping behaviours.
Murphy maintains however that Tesco is competitively priced compared to Aldi and Lidl: ‘We are the most competitive we have ever been, with our market-leading combination of Aldi Price Match, Clubcard Prices and Low Everyday Prices changing the way customers perceive value at Tesco.
‘We continue to target growth through making Tesco the most convenient place to shop. This year we have opened 91 stores across the group and are serving over 450 net new Booker retail partners.
‘Our acquisition of nine Joyce's stores in the Republic of Ireland and, more recently, the Paperchase brand in the UK signals our appetite to find new, value-creating growth opportunities in our core markets.’
GROUP SALES UP
Tesco group sales however rose by 5.3% to £57.66 billion compared to £54.77 billion in the same period a year ago.
The supermarket group was also the only full-line grocer to gain UK market share over three years.
Other highlights included further progress towards 2035 carbon neutral own operations, investing in the pay of UK store colleagues and supporting local foodbanks and communities with daily donations.
Analysts at Shore Capital remain upbeat about the supermarket group.
Clive Black said in a research note: ‘So, in tough markets set against a challenging UK consumer backdrop, we see Tesco toughing it out well. We will reflect upon the results and our forecasts, but with a small PBT beat, so higher base, and smoke signals to the potential for a flat FY24, we see scope for a modest nudge up to our PBT and EPS estimates, noting that higher UK Corporation Tax needs to be factored in too.’
