Tesco delivers solid results

Tesco, the world's third-largest retailer by sales, has reported a 9% rise in pre-tax profits to £3.2bn for the year to the end of February, on sales up 6% to £57bn. Non-food sales were up by 6.2% to £13bn; UK sales rose 4.2% to £42bn. The group, which is optimistic on the economy, is planning to expand further in Britain this year, adding selling space equivalent to 80 superstores, while it also announced a major push into China.

What the commentators said

Earnings growth of this scale "amid a vicious recession is a supremely solid" result, said Lex in the Financial Times, even if like-for-like sales growth for part of the year fell below that of smaller British rivals. The international business is expanding rapidly, said Nils Pratley in The Guardian. So, "even when rivals succeed in pinching a few morsels of market share in the UK, the effect is barely noticeable in the round".

The Korean business, for instance, is now the same size as the British one was in the early 1990s that's after only ten years. Yet it's still four times smaller in terms of market share than the current British business, so there's ample scope for further growth. There are blemishes on the record, with the US operation still losing 47 cents for every dollar of turnover (although Tesco reckons losses have now peaked). But on balance, its returns from investing in 13 countries outside Britain have been "overwhelmingly" positive.

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Tesco will be able to fund further overseas expansion from the money freed up by cutting debt faster than expected, added Neil Collins on Breakingviews. Throw in the opportunity in financial services, said Lex, and the outlook remains favourable. Over the long term, the group "should continue to prove its critics wrong".

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