Tesco’s share price reaches 16-year high

BRITAIN’S leading retailer, Tesco, said sales rose strongly in the third quarter, pushing its share price to a 16-year high.

Shares climbed 4.5% to 311.5 pence in early trading, their highest since September 12, 1988.

Profits before tax for the financial year 2005 are being revised following strong third quarter sales growth.

One broker has increased his 2005 forecast from £1.99 billion (€2.8 billion) to £2.07bn (€2.95bn) profit before tax.

Ian McDonald of Numis Securities in Britain described the group as “class act” accounting for more than £1 in every £8 spent in the retail sector in Britain.

It has also taken on the threat of Wal-Mart, which owns Asda and is cutting prices by £5 million a week to counter the Wal-Mart threat.

Analysts believe Tesco supremo Terry Leahy is wining the battle and of 32 surveyed by Bloomberg yesterday, 25 rate the shares a buy while none has a sell recommendation on the stock.

Sales for the 14 weeks to November 20 were up by 12.2% as the biggest retailer beat targets most analysts had forecast.

Total British sales alone were ahead by 12.3%, higher than the 11.8% achieved in the second quarter and well above the average generated by the market over the period, the group said in an update yesterday.

Like-for-like sales at the company’s British outlets rose 9.8%, or by 7.5% excluding petrol sales, which the company said had been boosted from its aggressive price-cutting campaign.

“Petrol volumes continued to grow exceptionally strongly during the third quarter, helped by our efforts to keep fuel prices down during a period of rising oil prices.”

Overseas the group’s turnover grew by 18.2% at constant exchange rates but the strength of sterling took its toll, and actual sales grew 11.9% over the three months under review.

Tesco said it expects the contribution of new space to sales growth to increase in the fourth quarter as it begins trading from an additional 1.4 million square feet of new selling outlets.

Tesco said it has continued to take market share in non-food categories in Britain as it gears up for the critical Christmas season.

Looking ahead, a spokesman said low-priced electrical goods like kitchen and photography equipment were expected to be particularly successful during the festive season.

In September the group announced a 24% increase in underlying pretax profit for the year as booming sales of clothing, DVDs and stationery helped it gain further ground in the highly competitive retail sector.

By comparison its high street peers felt the pinch and former giants Marks & Spencer and Sainsbury have seen their independence threatened due to Tesco’s growing dominance.

The company is expected to chalk up pretax profits for the financial year of £2.06bn.

In Ireland the group owns 86 stores and employs more than 11,000 people.

It generated sales of €1.9bn last year.