Tesco has reported a doubling of pre-tax profits to £2.2bn for the year ending 26 February, driven by strong sales growth and a reduction in Covid-related costs. Total revenues rose 6% to £61.3bn, with the supermarket gaining market share across its business. However, the company warned of 'significant uncertainties' ahead, including cost inflation and changing customer behaviour as pandemic restrictions ease.
Chief executive Ken Murphy said Tesco is 'laser-focused' on keeping prices competitive amid soaring inflation, which hit a 30-year high of 7% in March. The supermarket has broadened its profit forecast for the current year to between £2.4bn and £2.6bn, below analysts' expectations of £2.84bn. Tesco's share price fell as much as 5% in early trading.
Adjusted operating profits at Tesco's core grocery business rose 35% to £2.6bn, while Tesco Bank returned to profit with £176m. The company increased its dividend by 19.1% to 10.9p and announced a £7 share buyback. Murphy noted that customers are already making trade-offs in their budgets due to rising living costs, and that Tesco is maintaining its edge against discounters through Aldi price matching and Clubcard offers.
Despite concerns over potential food shortages, Murphy said Tesco's sourcing teams have seen no signs of widespread disruption, though sunflower oil availability is 'patchy' due to the conflict in Ukraine. The company is exploring alternative vegetable oil sources. Online sales fell 6.5% to £5.9bn, representing 14% of total sales, down from a pandemic peak of 15.5% but still above pre-Covid levels of 9%.
