UK Retailer Tesco's Profit Jumps by a Record 10%

Tesco, the world's No.3 retailer, showed its resilience to the economic downturn, posting a 10 percent rise in underlying annual profit to 3.128 billion pounds ($4.57 billion), a record for a British retailer.

The supermarket group, which employs 440,000 people in about 4,000 stores across 14 countries, also said on Tuesday it had made a good start to its 2009-10 year during which it planned to add 26,000 jobs and over 8 million square feet of new space.

Tesco's sales rose 15.1 percent to 59.4 billion pounds in the 53 weeks to end-February. Its dividend was raised 9.7 percent to 11.96 pence.

Analysts' median forecast was for Tesco to make profit before tax and one of items of 3.04 billion pounds, according to a Reuters Estimates poll of 19.

"Across the group we have made a good start to the new financial year with total (group) sales up by 9.2 percent in the first six weeks, and 12.0 percent excluding petrol," the company said in a statement. "UK like-for-like sales growth, excluding petrol, was 3.4 percent in the first six weeks. On a VAT-adjusted basis, growth was higher, at 4.4 percent."

Michael Probst / AP

Tesco said it planned to cut capital expenditure to around 3.5 billion pounds this year.

Tesco shares have performed in line with the DJ Stoxx European Retail Index over the past year, but trade at a discount as a multiple of forecast earnings to rivals such as J Sainsbury  and Morrison on concerns it is losing UK market share.

Sainsbury posted a 6.2 percent rise in underlying sales for the 11 weeks to March 21, but Tesco says its growth is being curbed by shoppers swapping to its cheaper discount brand range.

Net debt jumped to 9.6 billion pounds to pay for an acquisition in South Korea and a deal to buy Royal Bank of Scotland out of the a financial services joint venture.

Tesco said its fledgling U.S. business made a trading loss of 123 million pounds on a constant currency basis, worse than its guidance.

Chief executive Terry Leahy said he remained "absolutely" committed to the U.S. business although it was impossible to say when it would break even.

Copyright 2009 Reuters. Click for restrictions.