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Tesco boss Dave Lewis has hailed significant progress in the supermarket’s turnaround as the business revealed the first quarterly rise in sales in three years this morning.
Total group revenues in the year ended 27 February fell 1.6% to £48.35bn, but trends improved toward the end of the period, with UK volumes climbing 3.3% in the fourth quarter resulting in like-for-like sales growth of 0.9%, compared with a 1.5% decline in the previous three months.
Full year sales in the UK declined 0.4% year on year as a result of the declining contribution from net new store space as the retailer closed 60 of its shops and high levels of deflation as Tesco and its rivals invested in price.
Operating profits returned back to the black to reach £1.05bn, up from a loss of £5.75bn as the supermarket was hit with massive write downs in the value of its store estate.
Tesco said in the results that it had achieved what it set out to do. “We have made significant progress against the priorities we set out in October 2014,” Lewis added.
“We have regained competitiveness in the UK with significantly better service, a simpler range, record levels of availability and lower and more stable prices. Our balance sheet is stronger and we are making good progress in rebuilding trust in Tesco and our investment case.
“Our process of transformation has generated broad-based positive momentum in the UK and internationally. We set out to start rebuilding profitability whilst reinvesting in the customer offer, and we have done this. More customers are buying more things more often at Tesco.
“As a team, we are committed to serving shoppers a little better every day, in what remains a challenging, deflationary and uncertain market. We are confident that the investments we are making are leading to sustainable improvements for customers whilst creating long-term value for our shareholders.”
Tesco reduced it net debt by £6.2bn during the year, which included the contribution from the sale of Homeplus in Korea, to close at £5.1bn. The retailer made no mention of plans for Dobbies, Giraffe or Harris & Hoole in the accounts.
The supermarket said looking ahead it would continue to invest in the customer offer which would be reflected in the pace of improvement in profitability in the current year, particularly in the first half.
Shares in Tesco have slumped 3.3% to 190p on opening this morning, wiping out all the gains of the past week.
Morning update
US food group McCormick has walked away from its pursuit of Premier Foods (PFD) after examining the Mr Kipling and Bisto maker’s books.
The group said in a statement this morning that it does not intend to make an offer after completing its due diligence review, which it stressed was conducted with the management of Premier Foods “in an open and collaborative spirit”.
“McCormick has, after careful consideration, concluded that it would not be able to propose a price that would be recommended by the board of Premier Foods while also delivering appropriate returns for McCormick shareholders,” the group said.
Premier has previously turned down offers of 57p, 60p and 65p from McCormick before letting the US suitor take a look at its books and pension obligations.
The board of Premier said in a separate statement that it saw a “strong future” for an independent Premier Foods, with the foundations have been laid for significant growth and shareholder value creation.
“The board also considers that the company’s longer-term prospects will be enhanced by the co-operation agreement it has signed with Nissin Foods, which will expand Premier Foods’ range of growth opportunities.”
Shares have crashed more than 30% this morning to 39.5p as the City expressed its disappointment that McCormick won’t be buying the business.
WH Smith (SMWH) has announced its best performance on the high street for “many years” as pre-tax profits in the first half to 29 February 2016 jumped 11% to £80m. Trading profit on the high street came in 6% higher at £53m and 9% up in the travel division to £35m. Group total sales in the period increased 4% to £633m, with like-for-like sales up 2%. CEO Stephen Clarke said: “The group has delivered a strong first half with both our travel and high street businesses performing well.”
Travel total sales were up 11%, with LFL sales up 5%, as WH Smith continued to invest in the division and passenger numbers in the UK grow. The group also now has 200 international stores in airports around the world.
High street total sales were down 1% in the half with like-for-like numbers flat. “In high street, the flat like-for-like sales – our best performance for many years – were driven by a very strong performance of seasonal products over the key five week Christmas period.
“Stationery sales were particularly strong, driven by investment in new product ranges and both our Stationery and Books business continue to benefit from strong sales in adult activity books, such as colour therapy, extreme dot-to-dot and querkles.”
WH Smith’s share price is up a healthy 2% so far to 1,841p on the back of the positive results/
Yesterday in the City
Tesco (TSCO) shares performed well leading up to this morning’s results after the supermarket announced it had sold an 8% stake in South East Asian e-commerce business Lazada to Alibaba for $129m. The stock closed 1.5% higher at 196.3p and are up 3.3% since Friday as the City got wind of a possibly rise in sales.
Cranswick (CWK) investor flocked to take advantage of 16% jump in the share price yesterday after the pork producer acquired a second poultry processor Crown for £40m. The shares fell 5.4% to 2,402p during the sell-off – and after Peel Hunt and Numis issued a ‘hold’ rating.
Other significant movers included B&M European Value Retail (BME) which bounced back from Monday’s falls to climb 2.3% to 268p as Deutsche talked up the stocks potential.
Dairy Crest (DCG), Sainsbury’s (SBRY), Greggs (GRG) and Marks & Spencer (MKS) all finished the day down, 2% to 592.5p, 1.8% to 285.8p, 1.1% to 1,066p and 1.3% to 437.7p respectively.
The FTSE 100 climbed almost 43 points – or 0.7% – to finish 6,242.39 despite the IMF warning about weak growth facing the global economy and the potential damage of a Brexit.
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