Tesco reports 20% fall in profits

Tesco has reported a fall in profits, despite a rise in sales.

After repaying £535m of business rates relief and £892m of Covid-related costs, the group a 20% fall in profits to £825m.

Like-for-like sales increased by 6.3% whilst online sales jumped by 77% to £6.3bn.

“Our decision to protect and hold the dividend flat for this financial year demonstrates our commitment to shareholders,” said the Tesco chief executive in a trading statement.

“We believe we can create significant further value for them and every stakeholder in our business by continuing to focus on value, loyalty and convenience for customers, underpinned by strong capital discipline.”

Michael Hewson, chief market analyst at CMC markets, said:

“Today’s full year numbers showed that these higher costs, as well as investment in extra capacity, have not only impacted profits, but in facing up to the challenges presented by the likes of Aldi and Lidl revenues, and its “Aldi Price Match” campaign, have also impacted revenues which have come in lower, despite the higher demand due to the pandemic.

“While group like for like sales rose by 6.3%, with the UK and Ireland accounting for 6.8%, revenues including fuel were 0.4% lower from a year ago at £57.9bn.

“In terms of the outlook Tesco said it expects sales volumes to decline as lockdown restrictions ease, however costs are also expected to decline as well. This should translate into better margins, and an increase in profits, which should head back to the levels seen last year.”

Tesco shares are trading -2.66% at 225.94 (0921GMT).