Tesco profits grow but UK subdued

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5 October 2011 Last updated at 07:00 GMT UK sales were "weak", Tesco said Supermarket group Tesco has reported a rise in half-year profits despite a fall in underlying sales in the UK.

Pre-tax profit for the 26 weeks to 27 August was ￡1.9bn, up 12.1% on a year earlier. Group sales rose 8.8% to ￡35.5bn, but like-for-like UK sales excluding VAT and petrol fell 0.5%.

The company highlighted "excellent growth" in Europe and Asia but also "subdued demand" in the UK.

Rival Sainsbury's reported slightly better like-for-like sales.

Excluding petrol but not VAT, Sainsbury's sales rose by 1.9% for the first six months of the financial year. The equivalent figure at Tesco was a rise of 0.5%.

Sainsbury's chief executive Justin King said: "We have delivered a good sales performance in a tough consumer environment."

'Weak' sales

Tesco contrasted the "challenging conditions" in developed countries, particularly the UK and the Irish Republic, with "continued strong growth in emerging economies".

The company said "weak" sales in the UK were not helped by slowing demand for non-food items, particularly in electronics and entertainment, two of its largest product groups.

It also highlighted the high price of petrol and its impact on general consumer spending.

Despite the fall in like-for-like sales, trading profits in the UK rose by 4.5% to ￡1.3bn.

Tesco makes about two-thirds of its sales and profits in the UK.

Like-for-like sales excluding petrol grew in regions outside the UK, with the US seeing sales growth of almost 12%. The company said its plan to break even in the country in the 2012-13 financial year was "showing promising early results".

Like-for-like sales in Europe grew by 1% and in Asia by 3.8%.

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