Tesco released Preliminary 2023/24 results on Wednesday, revealing a solid year of revenue and profit growth as the company successfully fights off pressure from the discounters.
The group noted improving consumer conditions as market share increased 28bps to 27.6% during the period. All important UK & ROI retail operating margins increased 42bps to 4.2%.
“We have strong momentum in our business, and are encouraged by signs of improving consumer sentiment. We’re excited about the opportunities ahead, with the right plans to keep winning with customers,” said Ken Murphy, Chief Executive.
Britain’s largest supermarket has successfully navigated the tightrope of balancing budget and premium offerings—no mean feat in the current competitive environment.
For the first time, the Tesco Finest range generated more than £2bn in sales in the full year. At the same time, Tesco has aggressively challenged discounters Lidl and Aldi by price-matching 4,000 products.
The result is a 7.4% jump in group sales driving a 10.9% increase in retail operating profit.
“Tesco has continued to deliver following their strong update at the turn of the year with more of the same and the outlook is good. Profits are up and are expected to rise further in the coming year as inflationary cost pressures, which have haunted the sector in recent years, are easing substantially and will ease further,” said Adam Vettese, analyst at investment platform eToro.
“Britain’s largest retailer has used its size to its advantage by being able to ride out these pressures and also deliver value to cost-conscious shoppers in the meantime, even price-matching heavy discounters, which has been key to their market share ascendancy.”
Commenting on the sale of Tesco Bank, Tesco said the sale is likely to be completed in H2 2024, generating £1bn cash, of which £250m will be returned to shareholders as a special dividend.
“Disposals within the banking arm and share buybacks on the horizon will please investors as they look to see the price kick on through the rest of the year, with the aim of surpassing the troublesome 300p level which once again provided resistance last month,” Vettese said.