Tesco profits soar to £2.2bn

Tesco underlined its dominance of the retail sector today by reporting annual profits of £2.21bn (€3.2bn) – a jump of almost 17% on a year earlier.

The latest improvement included a 10.7% rise in total sales at its UK stores, even though the company said it had been a “more challenging year”.

Tesco does not release separate figures for its Irish stores - of which there are 93 - but said sales were up about 16%.

The supermarket chain also revealed plans to boost its firepower by raising up to £5bn (€7.2bn) from the reorganisation of its UK property portfolio over the next five years.

The retailer, which overtook Sainsbury's as the UK's biggest supermarket chain in 1995, took £32.7 (€47.1bn) in sales from shoppers in its domestic market during the 12- month period to the end of February.

That represented an increase of 7.5% when the impact of new store openings was stripped out. However, Tesco indicated a recent slowing in its growth after the like-for-like figure eased to 4% in the final seven weeks of the year.

That reflected a weaker performance in January but the rate of growth picked up in February and again in the early weeks of the current financial year.

Operating profits from the UK rose 15% to £1.79bn (€2.6bn) in the full-year period, as the chain overcame the impact of rising energy cost and business rates through better cost control and productivity. International sales were up 23%.

Tesco's latest record profit comes amid a period of uncertainty for the group.

As well as increased competition from resurgent rivals Morrisons and Sainsbury’s in the UK, the company is to be part of a sector-wide investigation into the possible use of anti-competitive practices.

Pricing tactics and the alleged use of “land banks” to prevent rival retailers opening new outlets have been called into question by the British Office of Fair Trading.

Tesco shares have struggled to make progress despite the company’s continued dominance of the UK supermarket sector.

Growth in its shares has been limited to 4% over the past year, making it one of the 20 poorest performers in the FTSE 100 Index.

The company moved to boost the return of shareholders today by announcing plans to set aside £1.5bn (€2.2bn) towards buying back Tesco shares.

That money will be found by joining forces with property companies to carry out further sale and leaseback deals on its estate.