Results round-up
Tesco broke back into the black with a £162m pre-tax profit that marked a turnaround from the previous year's record £6.3bn loss, also delivering the first annual volume growth in five years.
The UK's largest supermarket generated a 0.9% increase in UK like-for-like sales in the fourth quarter ending 27 February, its first growth in three years, contributing to group LFL growth of 1.6% for the quarter.
Operating profits of £944m were ahead of the consensus estimate of £936m, while the 'clean' profit before tax, exceptional items and pension costs came in at £435m, down 11%. Statutory PBT was aided by impairments of £408m against the kitchen-sinking £5.4bn a year ago.
Group sales of £48.35bn were down 1.6% year-on-year, or down 3% against the statutory 53-week results from the prior year. However, across all geographic regions the business has returned to positive like-for-like sales growth.
Chief executive Dave Lewis hailed the significant progress made against the priorities he set out in October 2014, regaining competitiveness in the UK with "significantly better service, a simpler range, record levels of availability and lower and more stable prices", saying "more customers are buying more things more often at Tesco”.
However, after pointing to key achievements such as a stronger balance sheet where debt has been cut by £6.2bn to £5.1bn and claiming progress in rebuilding investor trust, as the shares bounced off their January low, Lewis later took some of the froth off with cautious statements to reporters on a conference call.
Lewis said hitting the consensus forecasts of a trading profit of £1.25bn for the current financial year would be “a substantial, substantial achievement”.
He indicated that the grocer is focused on investment in the customer offer to cope with the cut-throat UK grocery market, which will impact profitability particularly in the first half of the year: “profit growth won’t be smooth, we are in a turnaround".
The grocer intends to increase capital expenditure from £1bn in 2015-16, which was around 1.8% of sales, to £1.25bn in 2016-17.
WH Smith reported a jump in earnings on Wednesday, with profit across the FTSE 250 retailer improving in the six months to 29 February.
Group profit before tax rose 11% to £80m, from £72m, while diluted earnings per share were up 13% to 57.4p, from 50.8p.
Smith’s profit in travel trading was up 9%, and its high street trading saw profit improve 6%.
Sales were mixed, however, with group total sales up 4%. Travel sales were up 11%, while the high street division saw sales fall 1%.
On a like-for-like basis, group sales were up 2% with travel saled growing 5% and high street sales flat.
"The group has delivered a strong first half with both our travel and high street businesses performing well,” said group chief executive Stephen Clarke.
"The travel performance reflects our ongoing investment in the UK business and growing passenger numbers while internationally we have now secured over 200 stores, including our first airport shops in Spain and Germany.”
Clarke said flat like-for-like sales on the high street was the group’s best performance for many years, driven by a strong performance of seasonal products over the five week Christmas period.