Tesco, one of the world’s leading retailers, has put a troubled period behind it with a triumphant return to bumper profits.
Shares rose 11.6p in early trading to 221.9p as investors toasted the first end-year dividend since 2014.
Like-for-like sales – which take account of store openings and closures – rose 2.2 per cent in the UK, and net debt was down by 29.6 per cent to £2.6 billion, from £3.7 billion.
Using the statutory measure, earnings per share rose from 0.81 per cent last time to 12.08p, an astonishing 1,391.4 per cent increase.
Ten years ago, Tesco’s domination of the British retail scene was such that commentators complained the country was turning into “Tescoland”. But problems mounted in the current decade, starting with the failure of its Fresh & Easy grocery chain in the United States. Tesco made a series of errors that suggested it did not understand the differences between the British and American markets.
Much more seriously, in September 2014 Tesco had to tell the stock market that its profit forecast had been overstated by £250 million, largely as a result of commercial income having been booked too early.
Carl Rogberg, aged 51, the ex-UK finance director, Christopher Bush, former managing director of Tesco UK, and John Scouler, former UK food commercial director, were charged with false accounting and fraud. Britain’s Serious Fraud Office will take the case to trial at a date yet to be fixed.
None of the defendants still works for Tesco, distancing the case from the company. However, the supermarket still faces a large claim for equal pay on behalf of mainly women working in the stores who claim their wage packets are less than those, mainly men, who work in the company’s warehouses.
David Lewis, Tesco chief executive, said: “This has been another year of strong progress, with the ninth consecutive quarter of growth. More people are choosing to shop at Tesco and our brand is stronger, as customers recognise improvements in both quality and value. We have further improved profitability, with group operating margin reaching three per cent in the second half.”
Tesco, whose overseas operations span Central Europe and Asia, increased group sales from £49.9 billion to £51 billion and achieved cost savings during the year of £594 million.
During the period, Tesco completed its merger with food wholesaler Booker. Mr Lewis said: “We are moving quickly to deliver synergies and access new growth, making the most of the complementary skills in our combined business.”
Tesco added: “We remain firmly on track to deliver the medium-term ambitions we set out in October 2016: to reduce our costs by £1.5 billion, to generate £9 billion of retail cash from operations and to improve operating margins to between 3.5 per cent and four per cent by 2019-2020.”