Tesco enjoyed a strong year 2021, in which pre-tax profits even tripled. However, the British supermarket giant warns of significant uncertainties and strong price inflation this year.
Return to the stores
The broken financial year 2021/2022 – ending in February – was a success for supermarket group Tesco: retail sales increased by 6 % to 61.3 billion pounds (74 billion euros) and the British market leader gained market share. Profits also rose spectacularly, with pre-tax profits reaching 2 billion pounds (2.5 billion euros), three times more than in the previous year. Operating profit from retail activities rose by 35 %, mainly because high Covid costs (such as safety measures and extra staff) fell and shopping behaviour returned to normal.
As a result of this normalisation, however, online sales declined: e-commerce sales in the UK home market were down 6.5 % as customers returned to shops. Compared to pre-Covid year 2019, online sales are still 66 % higher. Tesco processed an average of 1.2 million orders per week last year.
Keeping prices in check
For this year, CEO Ken Murphy immediately tempers expectations. He now assumes a profit between 2.4 and 2.6 billion pounds, much lower than the 2.84 billion pounds analysts predicted. Murphy mentions significant uncertainties weighing on the company, referring to the war in Ukraine and to strong inflation and rising costs. Especially in the United Kingdom, competition from discounters Aldi and Lidl is fierce, which forces traditional supermarkets to keep prices low.
“Clearly, the external environment has become more challenging in recent months. Against a tough backdrop for our customers and with household budgets under pressure, we are laser-focused on keeping the cost of the weekly shop in check – working in close partnership with our suppliers, as well as doing everything we can to reduce our own costs”, according to Murphy. In addition, the company will buy back 750 million pounds of its own shares to boost stock value.
