The British supermarket giant has finalised an alliance with Carrefour to increase their leverage with suppliers

By AFP

LONDON • Tesco plc, Britain’s biggest retailer, said yesterday its purchase of wholesaler Booker helped support its underlying performance although first-half (1H) net profits sank as the supermarket group had booked an exceptional gain last year.

Profit after tax slumped 32% to £426 million (RM2.29 billion or €479 million) in the six months to the end of August, Tesco said in a results statement.

That compared to £628 million in the same part of the previous year, which was boosted partly by a large gain on the sale of its Korean operations.

Tesco added that its latest underlying operating profit jumped 24% to £933 million, helped greatly by the recent acquisition of British wholesaler Booker.

However, this figure undershot analysts’ consensus forecast, contributing to Tesco’s share price tanking 8.3% to 215.70 pence on London’s benchmark FTSE 100 index, which was up 0.4% overall.

“Tesco’s Central European operations suffered a setback as trading restrictions on Sundays and public holidays reduced the number of days its stores could open for business in Poland and Slovakia,” noted Laith Khalaf, senior analyst at Hargreaves Lansdown.

“It’s commonly thought that Sunday trading restrictions displace rather than deter consumer activity, but Tesco’s experience suggests otherwise, for the big supermarkets at least.

“The Central European business makes up just over 10% of group sales, so Tesco can probably take this one on the chin, while its UK business is ticking along so nicely,” Khalaf added.

Sales on a like-for-like basis, which strips out the impact of new floor space, climbed 2.3% in the second quarter (2Q).

“We have made a good start to the year,” CEO Dave Lewis said in the earnings release.

He added that the 2Q was driven mostly by solid performance in the UK and Ireland.

Tesco bought Booker for £3.7 billion earlier this year, in a radical repositioning of the UK retailer that has been troubled in recent years by an accounting scandal — and fierce competition from supermarket rivals and discount chains.

Booker is Britain’s biggest cash-and-carry operator and sells goods to more than 503,000 customers — including grocers, pubs and restaurants across the country.

Tesco, meanwhile, recently launched a rearguard action against German-owned discounters Aldi and Lidl with the launch of discount food store chain Jack’s.

The British supermarket giant has additionally finalised a purchasing alliance with French titan Carrefour to increase their leverage with suppliers — and enable them to slash prices on the supermarket shelves.

Tesco — the world’s third-biggest supermarket chain after Carrefour and global leader Walmart of the US — also has global operations dotted elsewhere including China, India, Ireland, Malaysia and Thailand.

Meanwhile in Britain, Sainsbury’s and Walmart-owned Asda unveiled merger plans in April to create a retail king that would leapfrog Tesco. That merger will, however, face an in-depth competition probe.

Meanwhile, Britain’s Tesco Bank has been fined £16.4 million for failing to protect customers during a 2016 cyber attack, regulators said on Monday.

The supermarket’s bank division failed “to exercise due skill, care and diligence in protecting its personal current account holders against a cyber attack”, the Financial Conduct Authority said in a statement.

The attackers netted £2.26 million during the 48-hour incident in November 2016, according to the watchdog.

The attack “exploited deficiencies” in the design of Tesco Bank’s debit card, as well as its financial crime controls and financial crime operations team, it said.

Tesco Bank customers were therefore left vulnerable to what the regulator described as a largely avoidable incident.