British retail giant Tesco makes a 'turnaround', reports a rise in profits

Tesco's turnaround continues as half-year profits surge despite inflation

Retail analyst Bruno Monteyne at Bernstein said Tesco's recovery was firmly "on track" after better-than-expected half-year profits.

The retailer said like-for-like sales in the United Kingdom and Ireland rose 2.2% compared to a year earlier in the 13 weeks to 26 August - the seventh straight quarter in which sales have grown.

In recent days, Tesco has not been the favourite of many City analysts either, with Credit Suisse warning that it remains most at risk of the big four United Kingdom supermarkets from the continuing rise of discounters Aldi and Lidl, while Berenberg said that Tesco investment case hung on margin recovery in the United Kingdom business that looks challenging given the structural and competitive pressures in the market.

Tesco Plc notched a whopping 691.5% rise in profit before tax to £562m in the first half of 2017-18, the group reported in its interim results today.

In its United Kingdom and Ireland markets, operating profit before exceptional items jumped 21.1 per cent year-on-year to £471 million compared to the same first-half period last year.

Pre-tax profit was also up - £562m for the first half compared with £71m for the same period a year ago.

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Shares in the supermarket chain opened some 2% higher on Wednesday morning, while rivals Sainsburys and Morrisons saw their shares fall roughly 1%. "There is still much to do, but crucially Tesco's customer experience is improving and its turnaround strategy is paying dividends - both metaphorically and literally".

Net (LSE: 0LN0.L - news) debt was down 25 percent year-on-year to 3.3 billion pounds.

The supermarket chain struck a £3.7bn deal to buy food wholesaler Booker in January, which is now being probed by the Competition and Markets Authority.

But the group has come under heavy fire in recent days over its own-brand chicken after it was discovered that supplier 2 Sisters had taken Lidl chicken and repackaged it under Tesco's Willow Farms brand.

The secret of his success has also been down to working with "fewer suppliers and then us [ing] Tesco's formidable buying power to drive down their prices", according to Ibbotson.

Russ Mould, investment director at AJ Bell, said the level of Tesco's planned dividends for the year would help to underpin consensus forecasts of payouts rising to 5.8p next year.

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