Tesco raises outlook, to buy back shares after strong first half

A Tesco logo is pictured outside a Tesco supermarket in Hatfield, Britain on October 6, 2020. REUTERS / Peter Cziborra / File Photo GLOBAL BUSINESS WEEK AHEAD

  • Retail core profit up 16.6% in the first half
  • Forecast annual retail profit of 2.5-2.6 billion stg
  • Launches a 500 million stg share buyback

LONDON, Oct. 6 (Reuters) – Tesco (TSCO.L), the UK’s largest retailer, raised its outlook for the full year by announcing a 16.6% increase in its core profits in the first half of the year and increased sales despite labor and supply chain disruptions and struggles COVID-19-related comparisons a year ago.

The group said on Wednesday that its strong first-half performance had allowed it to reduce its net debt by 1.7 billion pounds ($ 2.3 billion) since February, and that it would therefore use cash on a buyout of ‘shares, with the first tranche of £ 500 million in shares. to be purchased by October 2022.

Tesco forecast FY2021-22 adjusted retail operating profit of between £ 2.5bn and £ 2.6bn ($ 3.40-3.54bn), after previously forecasting a similar result to 2019-2020, where he made £ 2.3 billion.

Tesco, which owns 27% of the UK grocery market, reported first-half adjusted retail operating profit of £ 1.386bn – ahead of analysts’ average forecast of £ 1.262bn and £ 1.192bn. books made during the same period last year.

Group sales in the first half rose 2.6% to 27.3 billion pounds, while like-for-like sales in the UK increased 1.2%, after increasing 0.5% in the first trimester. Read more

“We had an excellent semester; sales and profits increased beyond expectations and we outperformed the market, ”said Managing Director Ken Murphy.

“With various different challenges currently affecting the industry, the resilience of our supply chain and the depth of our partnerships with our suppliers has once again proven to be a key asset,” he said.

Analysts say Tesco is benefiting from its huge online business, a pricing strategy that matches German discounter Aldi’s prices on around 650 products, and the success of its “Clubcard Prizes” loyalty program which offers lower prices to members. .

However, Tesco chairman John Allan told ITV last month that the disruption in the supply chain meant food prices could rise 5% this winter.

Tesco’s share price has risen around 10% so far this year, but has underperformed both Sainsbury’s (SBRY.L) and Morrisons (MRW.L).

Morrisons, which is bought out by US private equity firm Clayton, Dubilier & Rice, is up 60%, while Sainsbury’s, also backed by buyout speculation, is up nearly 33%.

Read more

Tesco is also paying an interim dividend of 3.2 pence, in line with the previous year.

($ 1 = 0.7351 pounds)

Reporting by James Davey, editing by Paul Sandle / Guy Faulconbridge

Our Standards: Thomson Reuters Trust Principles.

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