Tesco chief executive Terry Leahy today (17 April) played down something of a recovery from the company’s UK rivals as the country’s largest retailer published its full-year results.
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Leahy was speaking after Tesco posted a 13% leap in annual profits thanks to growth across its business. The company reported underlying profits of GBP2.6bn (US$5.2bn) for the 12 months to 24 February.
Tesco’s sales in the UK, stripping out the impact of sales from new stores, rose 5.6%. Earnings from Tesco’s UK business rose 9.2% to GBP1.9bn, the company said, despite a recovery from its competitors.
Retail analysts have hinted that Tesco’s UK rivals, Asda and Sainsbury’s, had seen their sales grow faster in recent weeks. Analyst TNS said that while Tesco had seen sales rise 7% during the 12 weeks to 25 March, Asda and Sainsbury’s had enjoyed growth of 9% and 8% respectively.
However, Leahy said that a scare over contaminated petrol on sale at its forecourt had weighed on the business in recent weeks. He said: “I wouldn’t overreact to these things. It’s always been a competitive market – and that’s not a bad thing. It keeps you honest and makes sure you’re on top form.”
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By GlobalDataFinance and strategy director Andrew Higginson refused to give specific details on Tesco’s current trading performance in the UK but said the company is “very happy with the way things are going at the moment”.
Leahy expressed his belief that UK food expenditure, as a proportion of total consumer spending, had stopped falling. Shoppers, Leahy said, are becoming more interested in cooking and the provenance of food and are more willing to pay more for “high-quality” food. He added: “It’s not just affluent consumers. It’s everyone.”
In a nod to consumers’ environmental concerns, Leahy said that Tesco would look to reduce the packaging on its branded and own-label products by 25% within three years.
Products would now be labelled with information telling consumers if the packaging could be reused, recycled or used for compost. Leahy said: “Crucially, this is up to us. These (concerns) are opportunities, not threats. It’s up to Tesco to lead the way.”
Internationally, Leahy said Tesco wants to develop the “most successful” approach to international retailing. Flexibility, looking after local consumer needs and focusing on a few key markets are crucial, Leahy said.
Leahy confirmed that the development of Fresh & Easy Neighborhood Market, Tesco’s upcoming business in the US, is on track. The first store, he said, would open later this year.
Leahy argued that the venture is “well timed” as consumers, particularly in California become more concerned about issues like climate change and “seek an alternative to the big box, out-of-town, retail parks they have there”.
