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Tesco delivered a record £2.8 billion (R43.4 billion) annual profit and had made a strong start to its new financial year, driving up its shares, the world’s third-biggest food retailer said yesterday.

By Rachel Sanderson

London – Tesco delivered a record £2.8 billion (R43.4 billion) annual profit and had made a strong start to its new financial year, driving up its shares, the world’s third-biggest food retailer said yesterday.

Britain’s biggest retailer, moving to knock down a rash of negative speculation about its business in recent weeks, added a market-pleasing property deal and revealed that sales at its nascent US venture, Fresh&Easy, were ahead of budget.

Tesco chief executive Terry Leahy, in an unusual step, provided a growth forecast of 3 percent to 4 percent for the full 2008/09 year. The firm’s shares rose more than 4.5 percent to £4.09.

Citigroup analyst James Anstead welcomed the forecast as well as the announcement of a property deal worth £207 million with Prudential, valuing Tesco’s total portfolio at £31 billion – a 57 percent premium to book value.

Leahy said the tough UK economy, with rising energy prices and mortgage repayments crimping spending, meant shopper habits were changing, but Tesco tended to “grow market share in this kind of environment”.

Tesco, which had a more than 30 percent share of the grocery market in Britain – double that of its nearest rivals, Asda and J Sainsbury – said trading profit rose to £2.75 billion in the year to February, led by strong growth in its international and online businesses.

“It is not all gloom; there are opportunities,” said Leahy. “Customers are more likely to look for value and value is one of the strengths for Tesco.”

Like-for-like sales, excluding fuel, in Tesco’s core UK market rose 3.5 percent and were up more than 4 percent in the first five weeks of its new financial year. This was slower, however, than the 4.1 percent growth seen in the third quarter.

Sales from its international operations – spanning 12 countries from China to Thailand, Turkey and the US, the world’s toughest consumer market – also grew strongly, increasing by 22.5 percent at constant exchange rates.

In the US, where it now had 60 stores after launching in November, sales were ahead of budget and sales densities were higher than the US supermarket average with the best stores exceeding $20 a square foot (R1 696 a square metre), Tesco said. But with its aim of a total of 200 stores open by the end of this financial year, US trading losses were set to widen to £100 million from £62 million last year, it said.