Tesco saw profits rocket in the last year, figures that are bound to raise questions about “greedflation” – claims that big stores are pushing through price rises under cover of inflation.
Britain’s biggest grocer saw profit up 160% to £2.29 million on sales up 7.4% to £61.5 billion.
That takes profit margins back above 4%, where they were before the pandemic. Profits next year should be higher still.
Tesco is rewarding shareholders with a £1 billion buy back of its own stock and is spending £70 million on a “thank you” payment to its 330,000 staff.
For the average full-time staffer, that’s a bonus of £300.
Chief executive Ken Murphy says all “stakeholders” are doing well, including the government since Tesco is paying more tax.
Murphy himself is registered for tax in Ireland where he is from and pays a lower rate of tax there than he would here. He was paid £4.4 million last year.
City analysts say Tesco has benefitted from some disarray at Asda and Morrisons, both under new private equity ownership that has seen them burdened with debts.
Murphy says Tesco is taking market share from those two and from the top end of the market such as Waitrose while remaining competitive with the German discounters Aldi and Lidl.
Murphy says he has a “healthy dose of paranoia” about the future, but thinks consumers are feeling more confident than for a while.
“The fight for the British consumer’s shopping basket is an intense one and we see no let up in that. We are very respectful of the competitive environment that we live in,” he said.
He added: “We want to be consistently the best quality and value. We think we can win in any environment. We fell quite good at where we are at the moment, but you can’t take your eye off the ball.”
Food inflation has tumbled and is likely to be in “low single digits” for the rest of the year.
Murphy said in a statement to the City: “Inflationary pressures have lessened substantially, however we are conscious that things are still difficult for many customers, so we have worked hard to reduce prices and have now been the cheapest full-line grocer for well over a year. We have continued to invest in helping customers where it matters most, cutting prices on more than 4,000 products and doubling down on our powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices.”
The dividend is up 11% to 12.1p. Tesco shares rose 2p to 290p which values the business at £20 billion.
John Moore, senior investment manager at RBC Brewin Dolphin, said: “Tesco has delivered an impressive set of results against some tough comparators from last year. Profits have surged and the supermarket group has reported strong growth more or less across the board, as the impact of its strategy filters through to the bottom line, inflation pressures begin to ease, and consumer sentiment improves.”
Tesco also unveiled a £500 million cost cut plan for the year. There will also be an investment in robot distribution centres and solar panels to power stores.
Critics think Tesco is overcharging for food. Unite general secretary Sharon Graham said Tesco was "raking in mountains of cash while families struggle to put food on the table because of sky high prices".
