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Tesco PLC on Wednesday reported steady growth in interim trading, but profit was stung by a ‘hefty impairment charge’, which is the cost of some price reductions due to increased competition from low-budget grocers Aldi and Lidl.
For the 26 weeks ended August 27, the supermarket said revenue rose 6.7% to £32.46 billion from £30.42 billion the year before.
Fuel sales surged 39% to £4.28 billion from £3.09 billion. Excluding fuel sales and VAT, revenue rose 3.1%.
Pretax profit, however, shrunk 64% to just £413 million from £1.14 billion.
It recognised a £626 million non-cash non-current asset impairment charge ‘related to an increase in discount rates this year’, it explained.
Chief Executive Ken Murphy said: ‘We know our customers are facing a tough time and watching every penny to make ends meet. That's why we're working relentlessly to keep the cost of the weekly shop as affordable as possible, with our powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices, together covering more than 8,000 products, week in, week out.’
The grocer proposed an interim dividend of 3.85 pence per share, a 20% increase from 3.20p a year before.
‘We saw significant cost inflation and some impact from a step up in own brand sales vs branded ranges as customers took steps to manage the pressure on their household budgets,’ Tesco said.
It said the acceleration of its Save to Invest programme contributed to the improved performance. It maintains annual profit guidance provided in April, ‘albeit towards the lower end’.
Adjusted operating profit of its retail unit fell 10% to £1.25 billion from £1.39 billion. Looking ahead, Tesco expects that to be between £2.4 to £2.5 billion in its full year.
Shares were up 0.2% at 210.40 pence each on Wednesday morning in London.
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