Tesco Year Profit up 13%, to Return $6 Billion

Tesco, Britain's biggest retailer, met forecasts with a 13% rise in annual underlying profit to 2.55 billion pounds ($5.1 billion) and doubled the amount of cash it plans to return to shareholders.

Tesco said on Tuesday it expected to return at least 3 billion pounds from property sales to investors, up from 1.5 billion previously.

With private equity firms targeting several of Britain's retailers for possible takeover, in part because of their rich asset base, companies are under pressure to extract value from the big rise in value of commercial properties.

Tesco, facing a growing challenge from supermarket rivals Asda and a resurgent J. Sainsbury, said like-for-like sales in its core UK market, excluding fuel, rose 5.8% in the final quarter of its financial year, which ended on Feb. 24.

This was up from a third-quarter rise of 5.6%.

Tesco shares jumped to a new high of 467-3/4 pence in early trading.

Britain's retailers are facing tough trading conditions as debt-laden shoppers try to cope with higher borrowing costs and household bills. Supermarket groups, however, are faring better than many specialist stores, with their focus on low prices.

"Clearly consumers are feeling the effects of higher interest rate rises and higher council tax," Tesco Chief Executive Terry Leahy told Reuters in a telephone interview.

"But I suppose if we are offering exceptional value, they come to us which is perhaps a strength going forward in a time of consumer pressure."

Tesco said annual revenues, excluding value added tax, rose 10.9% to 42.6 billion pounds, in line with analysts' forecasts.

The company, which employs more than 450,000 people, said it expected to create more than 25,000 new jobs worldwide this year.

The firm, which is expanding into the United States, proposed an annual dividend of 9.64 pence a share, up 11.7% on the year before.