Interim Trading Results Statement 2023/24: Focusing on Value and Quality to Serve Customers
Ken Murphy, Chief Executive Officer of Tesco, expressed the company’s commitment to addressing the financial challenges faced by households across the country due to ongoing cost-of-living pressures. Tesco is determined to reduce food bills and has consistently maintained its position as the most affordable full-line grocer.
Tesco’s investments in value, including the enhancement of over 1,100 own-brand products, spanning items from pasta to fresh fish, have enabled the company to offer high-quality products at competitive prices. This approach, combined with industry-leading product availability, has resonated positively with customers, resulting in market share gains both in physical stores and online. Tesco has experienced growth at both ends of the shopping spectrum, with a strong surge in demand for its premium “Finest” range as customers seek affordable indulgences at home, leading to a shift from premium retailers to Tesco.
The company’s relentless customer-centric focus, coupled with substantial cost reductions through its “Save to Invest” program, has contributed to a robust financial performance in the first half of the year. Despite external pressures, food inflation has decreased during this period, and Tesco expects this trend to continue into the second half of the year. Tesco remains committed to lowering prices wherever possible, ensuring customers can enjoy an affordable Christmas shopping experience.
Key Financial Highlights:
- Strong sales performance across the Tesco Group, with Retail Like-for-Like (LFL) sales increasing by 7.8%. Notable achievements include an 8.4% LFL sales growth in the UK and ROI, with the UK experiencing a significant 8.7% increase.
- Retail adjusted operating profit stands at £1,417 million, marking a 13.5% increase at constant rates. This includes significant contributions from Tesco’s “Save to Invest” program, amounting to approximately £290 million.
- Tesco Bank adjusted operating profit has seen an impressive 25.0% rise, primarily due to strong income growth. The Bank has returned £250 million as a special dividend to the Group, reflecting its robust financial position.
- Tesco’s retail free cash flow reached £1,368 million, bolstered by a positive working capital inflow of £368 million.
- Net debt has improved by £605 million since the previous year-end, mainly attributed to strong cash flow and the special dividend from Tesco Bank. The net debt/EBITDA ratio is now at 2.3x.
Looking ahead, Tesco intends to continue prioritizing investments in its customer offerings while collaborating with suppliers to reduce prices. The company anticipates retail adjusted operating profit for the 2023/24 financial year to be in the range of £2.6 billion to £2.7 billion, along with retail free cash flow ranging between £1.8 billion and £2.0 billion.
Tesco remains steadfast in delivering on its strategic priorities, which include offering value and convenience to customers, enhancing its digital capabilities, ensuring convenience and flexibility in customer service, and implementing cost-saving measures.
In summary, Tesco’s interim results reflect the company’s commitment to delivering value and quality to its customers, with a strong financial performance in the first half of the year, and a strategic focus on long-term sustainability and stakeholder value.