Top story
Profits at Tesco have soared £1.4bn higher as sales increased over the past year, but the supermarket giant warned the bottom line would come under pressure in 2022 as it battled to keep prices low amid rampant inflation and a cost of living crisis.
Group sales (excluding fuel) rose 2.5% to £54.8bn in the 52 weeks ended 26 February despite coming up against elevated figures from a year ago when restaurants and pubs remained closed during lockdown.
The rise in sales combined with much lower costs associated with Covid safety measures and a return to profitability for its banking operation helped pre-tax profits jump by 220% to £2bn. Although, the group highlighted the rise was partially offset by inflationary pressures in the cost base, particularly in distribution costs.
Its adjusted operating profits from the retail side of the business increased 35% to £2.6bn.
However, Tesco forecast retail adjusted operating profits of between £2.4bn and £2.6bn for the current 2022/23 financial year. The expected profit range is wider than usual given the “significant uncertainties” in the trading environment.
CEO Ken Murphy said Tesco would continue to champion great value for customers at a time when they are facing increasing pressure on household budgets.
“Against a tough backdrop for our customers and with household budgets under pressure, we are laser-focused on keeping the cost of the weekly shop in check - working in close partnership with our suppliers, as well as doing everything we can to reduce our own costs,” he added.
“Through our powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices, we are making more products more affordable, in more places than anyone else.”
Online sales at the grop remained significantly ahead of pre-pandemic levels, with orders held at about 1.2 million per week and market share gains of 142 basis percentage points to 34.8%.
UK and Republic of Ireland one-year like-for-like sales increased by 2.2% on top of the “exceptional” growth of the prior year, driven by a sharp recovery in Booker catering sales, strong non-food sales and sustained market outperformance in the UK.
Two-year like-for-like sales increased 8.8%, with all businesses growing versus pre-pandemic levels.
In the UK, one-year like-for-like sales increased 0.4%, which included 1.2% growth in the first half and a 0.5% decline in the final six months as it lapped tough comparators during the second and third national lockdowns.
Murphy said: “Over the last year, we delivered a strong performance across the Group, growing share in every part of our business. We did this by staying focused on our customers and doing the right thing for our colleagues, our supplier partners and the communities we serve. I want to thank all of our colleagues who did a brilliant job navigating the ongoing pandemic, dealing with the supply chain challenges in the industry and tackling the onset of increasing inflation.”
Shares in Tesco plummeted by 5.7% to 255.1p as markets opened as investors digested warnings over future profits.
Morning update
Inflation continued to soar higher last month as petrol prices rose sharply and food costs climbed, according to the latest official figures released this morning.
The Office for National Statistics (ONS) reported an increase in inflation to 7% in the 12 months to March, up from 6.2% in February.
Its the highest rate of CPI inflation since March 1992, with bigger rises still expected as energy bills rocketed higher in April.
Record highs for fuel prices were the biggest contributor to inflation in March, with average petrol prices at 160.2p per litre compared with 123.7p a year earlier and a 12.6p per litre rise between February and March.
Food and non-alcoholic beverages remained below the headline rate of inflation but were up by 5.9% in March and alcoholic beverages and tobacco rose 4.8%.
ONS chief economist Grant Fitzner said: “Broad-based price rises saw annual inflation increase sharply again in March.
“Amongst the largest increases were petrol costs, with prices mostly collected before the recent cut in fuel duty, and furniture.
“Restaurant and hotel prices also rose steeply in March, while, after falling a year ago, there were rises across a number of different types of food.”
Personal care group PZ Cussons has leaned on pricing to help lift like-for-like revenues by 8.5% to £146.3m in its third quarter ended 28 February 2022.
In a trading update, the business said 8% of the increase was delivered by price/mix contribution as volumes stayed flat.
It signalled a continued turnaround for the Imperial Leather and Carex maker under CEO Jonathan Myers.
However, he warned the external trading environment was among the most challenging he had experienced.
“Input costs have continued to escalate in recent weeks, and it is likely that household budgets will soon come under pressure,” Myers added.
“Our teams are working hard to address both of these dynamics. We are removing costs that the consumer does not value, and have plans in place to meet evolving consumer needs, including innovation to offer everyday great value as well as more premium-priced launches. While the coming months will continue to be challenging for us and the wider consumer goods sector, the strength of our brands and our strategic progress gives me confidence in the long term prospects for the business.”
Third-quarter revenues increased 26% in Africa, where the group continues to work to simplify operations in Nigeria, by 4.3% in Asia Pacific, but fell by 5.3% in Europe and the Americas as demand for hand hygiene continued to soften from pandemic highs.
By category, hygiene sales overall for the quarter increased 7.7% as growth across all major brands offset declines for Carex, baby revenues grew 0.9% and beauty declined 1.7%.
“The journey to return PZ Cussons to sustainable, profitable growth is firmly on track and we expect to report like-for-like revenue growth for the current financial year,” the group said.
The latest quarterly figures represent a continued improvement following a 9.3% decline in Q1 and 5.5% growth in Q2, resulting in year-to-date like-for-like growth of 1.3%.
Its eight ‘Must Win’ brands improved performance to flat year on year and grew by 12.6% versus the same quarter in 2020.
PZ Cussons also recently announced it had acquired baby personal care brand Childs Farm, which it added its stable of ‘Must Win’ brands.
The FTSE 100 nudged 0.1% higher to 7,581.73pts this morning as the latest UK inflation figures were released.
PZ Cussons increased by 0.9% to 202.2p on its positive trading update.
Other early risers included Vimto maker Nichols, up 3.3% to 1,348p, McColl’s Retail Group, up 2.1% to 3.5p, and Virgin Wines UK, up 0.7% to 123.4p.
Along with Tesco, fallers so far include Ocado, down 3.3% and Sainsbury’s, down 2.9% to 237.6p.
Yesterday in the City
Deliveroo shares sank 1.8% today to 107.5p after the delivery firm warned of slowing consumer spending in a trading update. The stock is down by more than 46% so far this year and is way off its 390p IPO price.
After an early rise, Parsley Box fell 2.2% to 20.1p after the ready meal group filed its first full-year results as a listed company, with new customer wins falling back.
Other fallers included Greencore Group, down 5.6% to 120.8p, McBride, down 4.8% to 35.6p, Ocado, down 4.2% to 1,185.5p, and WH Smith, down 3.5% to 1,434p.
McColl’s Retail Group was back among the climbers, rising 18.2% to 3.3p, with THG also up 4% to 93.8p and Bakkavor Group up 1.7% to 108.6p.
No comments yet