Tesco beats volcano with record profits

TESCO yesterday reported record pre-tax profits of £3.2bn – while escaping the impact of the volcanic ash crisis because so little of its produce is imported by plane.

The company saw its net profit up 10.4 per cent up on the previous 12 months.

The supermarket giant said the reason for the gains included an 18 per cent rise in the use of clubcards, while its banking arm was also performing well.

Group sales, including petrol, went up by 8.5 per cent to £62.5bn in the 52 weeks to 27 February.

Chief executive Terry Leahy said: “Less than one per cent of our produce comes in by air so the impact has been more on staff and customers.”

He said that some of the flowers and produce from Kenya were being shipped in after coming through Spain.

He added: “By remaining focused on our strategy Tesco has weathered the economic storm well.

“Across the group, we have successfully adapted our cost structures and ranges to help customers save money when they’ve needed to and treat themselves when they’ve wanted to.”

Leahy said that Tesco has outperformed the broader market. He did not think the UK was heading for a douple dip recession despite the sluggish economic recovery, but said he expects a gentle rise in inflation in the months ahead.

Tesco first recorded an annual profit of £1bn in 2001 and has reported increases on that every year since.

Despite the upturn, losses at Tesco’s Fresh And Easy stores in the US have widened.

The Los Angeles-based convenience store chain, which started trading in the autumn of 2007, made a loss of £165m – up from a loss of £142m the previous year.

Despite the good results, Tesco was a blue-chip faller in trading yesterday, losing 0.1 per cent. The group cut net debt to £7.9bn, ahead of an expected decline to about £8.5bn, and lifted its full-year dividend 9.1 per cent to 13.05 pence a share. Other food retailers suffered in sympathy, with Sainsbury and WM Morrison losing 0.2 and 0.6 per cent, respectively.