Tesco profits surge as virus fuels online food demand

LONDON • Britain’s biggest retailer, supermarket giant Tesco plc, announced yesterday a 42% jump in net profit in its first half (1H) on soaring online demand for food during the coronavirus outbreak.

Profit after tax jumped to £460 million (RM2.46 billion) in the six months to the end of August, compared to £324 million a year earlier, Tesco said in a statement.

This came despite exceptional costs of £533 million in response to the pandemic, notably the creation of 16,000 jobs to meet the growing online demand.

Tesco’s operating profit dropped 4.5% to £1 billion, while group revenue climbed 6.6% to £26.7 billion.

Sales were fuelled by Britons increasingly switching from Tesco’s largest stores to having their groceries delivered.

“Growth in 1H was most marked in online with sales up 69%, with the rate of growth reaching 90% during the second quarter,” Tesco said.

Britain began emerging in June from a nationwide lockdown that had lasted nearly three months.

Tesco added that sales at its small convenience stores grew 7.6% in the reporting period, with people working from home grabbing, for example, a sandwich at lunchtime.

Sales grew 1.4% in its big traditional stores visited by “customers seeking to shop less frequently while buying more on each visit”, Tesco added.

“The 1H of this year has tested our business in ways we had never imagined, and our colleagues have risen brilliantly to every challenge, acting in the best interests of our customers and local communities throughout,” new CEO Ken Murphy said in the statement.

“We are absolutely committed to continuing to invest in value for customers and safety for all in these uncertain times,” he added.

Murphy, former executive at pharmacy group Walgreens Boots Alliance Inc, replaced Dave Lewis who oversaw a major overhaul at Tesco during his five years at the helm, axing thousands of jobs as part of a massive cost-cutting programme.

Yesterday, Tesco’s share price climbed 2.2% to £2.19 in London morning trading.

“It turns out that Tesco’s initial expectation that the benefits from a change in the UK’s shopping habits would be outweighed by the extra costs associated with adapting to Covid-19 realities was a bit conservative,” noted AJ Bell investment director Russ Mould.

“Despite the investment required for hygiene measures, distancing and an expansion of its online delivery capacity, the company still reported an impressive advance in 1H profit.”

Tesco agreed in its 1H to sell its businesses in Thailand, Malaysia and Poland in deals set to deliver billions of pounds to the group. — AFP