Tesco talks up economy as profit lifts

TESCO said yesterday that the UK was unlikely to slide back into recession as it reported a 12.5 per cent increase in first half profit to £1.6bn.

The world’s third largest retailer said it had been boosted by the strength of Asian markets, offsetting “modest” UK sales growth in the 26 weeks to 8 August.

Outgoing chief executive Sir Terry Leahy, who is leaving the company in March, said the company was in good shape in a UK supermarket sector he branded “the best in the world”.

Sales across the group jumped by more than eight per cent to £32.9bn over the period.

Overall UK sales were up by around three per cent. Asked if the UK economy was likely to lurch back into recession, Leahy said: “My starting point is the global economy, which is in a pretty robust recovery. If you look at the customer psychology and the pulling power of the developing markets, I think they will pull Europe and the United States into a stable and established recovery.”

The company said UK like-for-like sales excluding petrol rose 1.3 per cent in the second quarter, compared with 1.1 per cent in the first quarter – but, adjusting for VAT sales, the figure was just 0.3 per cent higher over the half-year.

Tesco has more than 4,800 stores in 14 countries, with two thirds of its profit and sales generated in the UK.

Leahy was delivering his last set of results before handing over to international chief Phil Clarke.

Kate Calvert, analyst at Seymour Pierce, said: “These results show how with good cost control in the UK and internationally, Tesco is seeing the benefits of the global economic recovery and the benefit of food inflation.”