Tesco turnaround continues as half-year profits jump

British supermarket giant Tesco has reported a surge in half-year profits and rising sales as it hailed efforts to keep prices low amid Brexit-fuelled inflation.

The group said UK and Ireland underlying operating profits leapt 21.1% higher to £471m (€531m) in its first half after it notched up its seventh quarter in a row of rising sales.

UK like-for-like sales in the second quarter lifted 2.1%, although this was down slightly on the 2.3% recorded in the previous three months.

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

But he said the group's UK like-for-like sales growth in the second quarter fell short of City forecasts.

He said: "The lower-than-expected like-for-like growth is partly driven by their lower food inflation which they estimate to be 1% below the market as they continue to invest in the proposition.

"Fresh food volumes are growing at 1.5% suggesting that they continue to reduce the sales of (loss making) general merchandise."

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "There's not many things more telling about the health of a company than its ability to pay a dividend, and Tesco's return to the register after a three-year hiatus speaks volumes about the progress the company has made.

"It's only a small amount, but this token payment is symbolic in nature."

He warned the planned Booker merger would be the "potential banana skin for management".

He said: "The risk is that just as the good ship Tesco is steadying, it gets blown off course by the Booker deal. However CEO Dave Lewis will no doubt argue that in a world where Sainsbury's owns Argos, and Morrisons is flirting with Amazon, he needs to push Tesco on to stay ahead of the game."

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