Tesco set for £2.5bn profits

The UK's biggest supermarket chain will regain the spotlight this week as Tesco is expected to unveil annual profits of more than £2.5bn (€3.66bn) on Tuesday - more than £4,800 (€7,040) a minute.

While the drama of the abandoned private equity bid for rival Sainsbury's has recently dominated attention in the sector, the giant has also come under fire itself through its domination of the market.

The latest figures from TNS market research panel showed Tesco expanding its share of the grocery market to 31.2% in the 12 weeks to March 25.

Tesco launched a robust defence of its position in its response to the Competition Commission's probe into the £95bn (€139.3bn) grocery sector earlier this month, amid accusations that it was squeezing out local stores and creating a series of "Tesco towns".

The company argued that the grocery market was now "national" and not local as shoppers increasingly buy online and are prepared to travel further to visit a store.

Aside from grocery sales the supermarket's sales of cheaper entertainment products like CDs and DVDs has also put pressure on high street retailers such as HMV and Woolworths. Last October it even launched its own brand of computer software.

While the controversy over its domination continues, analysts believe that the size of the company and its strong asset base will protect it against any tightening in consumer spending during 2007.

Consensus forecasts predict that the retail chain will increase pre-tax profits by 12% to £2.54bn (€3.72bn) for the 12 months to February 24, with sales ahead 10% at £42.7bn (€62.6bn).

The group's network of more than 1,400 UK stores is predicted to deliver the bulk of the firm's profits with estimated trading profits of £1.92bn (€2.82bn).

And this year the company will embark on its entry into the US market - meaning that the UK's biggest food retailer could enter a dramatic new phase of growth.

Panmure Gordon's Philip Dorgan said he saw the potential for Tesco to treble its sales from the £38.4bn (€56.3bn) reported last year to £110bn (€161.3bn) within 10 years.