Tesco has rounded off its financial year with another set of solid numbers, posting sales growth across all of its markets, its highest UK market share in over a decade, and a fresh £750m buyback.
Investors should be encouraged by most of Tesco’s key metrics, given the challenging economic backdrop in which they are operating.
Group sales excluding fuel climbed 4.6% to £66.6bn on a comparable 52-week basis, with like-for-like sales up 3.5%. Growth came from every corner of the business: UK up 4.2%, Republic of Ireland up 4.6%, Booker up 0.2% and Central Europe up 2.2%.
Adjusted operating profit edged 0.6% higher at constant rates to £3,152m, as investments in price, quality and service, along with cost inflation, were offset by sales growth and a strong £535m contribution from the group’s Save to Invest programme.
Free cash flow jumped 11.8% to £2bn.
UK market share hit 28.5%, up 0.24% year-on-year and the highest level in more than a decade. Tesco has now increased its market share by 1.22% over the last three years, which many investors will see as a massive validation of its strategy to fight off pressure from discounters.
“Tesco’s full-year results look like a retailer in decent health serving a savvy consumer who wants to spend, but on their terms,” said Alex Pugh, Investment Writer at Freetrade.
“Tesco is still having to work hard for that growth, investing heavily in value, quality and service while absorbing operating cost inflation.
“The psyche of the UK consumer is a shopper in scrutiny mode. People want low prices, but they have not abandoned convenience, quality or the occasional treat either.
“The fact Tesco is expanding Everyday Low Prices, Clubcard Prices and Aldi Price Match while also growing Finest sales 15% to £3bn sums up contemporary British spending: thrift on the staples, selective on the extras, and very little tolerance for paying more without a very good reason.
Online is proving to be an area of strength after a conscious effort to strengthen its position there.
UK online sales rose 11% to over £7bn, with market share up 30 basis points to 35.7%. Tesco Whoosh, the rapid delivery service, grew 51% to pass £400m, while Finest sales jumped 15% to £3bn. F&F clothing added 5.1% to top £1.2bn, helped by the launch of F&F Online during the year.