Tesco Shares Surge as Operating Profit Grows
05 October 2016 - 7:30PM
Dow Jones News
LONDON—Tesco PLC shares soared Wednesday as the company's
half-year results offered further signs its turnaround plan is
bearing fruit, while Britain's largest retailer also announced a
cost-cutting plan to improve its margins.
Shares in the retailer opened 7% higher Wednesday.
Following years of market-share losses, Tesco has poured money
into launching more affordable products, simplifying its range and
improving its customer service.
"Prices are more than 6% lower than two years ago, availability
and service have never been better and our range is more
compelling," said Chief Executive Dave Lewis.
For the first half, operating profit—stripping out large
one-time charges—was £ 596 million ($770.4 million), compared with
£ 372 million a year earlier.
On a statutory basis, Tesco reported a net loss of £ 91 million
for the 26 weeks ended Aug. 27, compared with a loss of £ 365
million a year earlier, when earnings were hit by large
charges.
Revenue, excluding value added taxes, edged up to £ 27.34
billion, from £ 27.23 billion, though the figure came in below the
forecast of analysts polled by Thomson Reuters at £ 27.62
billion.
The retailer also reported an improving trend in like-for-like
sales across all formats, including its biggest stores, which have
suffered in recent years as consumers have embraced convenience
stores and online shopping.
Tesco is aiming for an operating margin of between 3.5% and 4%
by fiscal 2020, it said. As part of this, it will cut operating
costs by £ 1.5 billion by improving distribution and simplifying
its store operations. The company will spend £ 1.4 billion a year
in capital expenditure through fiscal 2020 to drive these
changes.
Tesco, which reported an adjusted operating margin of 2.18% for
the first half, said it is on track to report adjusted operating
profit of £ 1.2 billion for the year.
It also reported that the value of its food sales in the U.K.
grew for the first time since 2013 in the second quarter.
Tesco said its U.K. like-for-like sales edged up 0.6% in the
first half. Overall, the company's like-for-like sales rose 1%.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
October 05, 2016 04:15 ET (08:15 GMT)
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