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A ‘substantial’ easing of inflation has helped drive a double-digit increase in profits at Tesco as the supermarket boosted market share and saw volumes recover.

Group sales - excluding VAT and fuel - rose 7.4% to £61.5bn in the 52 weeks to 24 February 2024, with group retail like-for-like sales up 6.8%.

Adjusted operating profits jumped 12.8% to £2.82bn, with an 11% increase in retail profits to £2.76bn and profits from the bank up 213% to £69m.

Pre-tax profits soared 160% to £2.3bn after the group was hit by a one-off impairment charge of almost £1bn in the previous year.

Overall revenues at Tesco increased 4.4% in the year to £68.2bn as a 17% decline in fuel sales dragged on the top line.

CEO Ken Murphy said the supermarket had “worked hard” to reduce prices for shoppers and doubled down on its combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices.

Tesco cut prices on more than 4,000 products during the year, with an average drop of 12%.

“Customers are choosing to shop more at Tesco, which is reflected in growing market share as they respond to the improvements we’ve made to the value and quality of our products,” Murphy added.

“Inflationary pressures have lessened substantially, however we are conscious that things are still difficult for many customers, so we have worked hard to reduce prices and have now been the cheapest full-line grocer for well over a year.”

He said Tesco also continued to steal customers from premium rivals thanks to its Finest range. More than 23 million customers purchased the own-lable brand during the year, with one in four baskets containing a Finest product over Christmas, resulting in a 9% jump in annual volumes and a 15.7% rise in sales to exceed £2bn.

The Booker wholesale operation increased like-for-like sales by 5.4% to £9.1bn, with retail sales excluding tobacco up 11%.

Tesco reduced net debt during the year by £729m to £9.8bn thanks to strong cashflow and a special dividend of £250m from its banking arm.

The group proposed a final dividend of 8.3p a share, giving an 11% rise in the full-year dividend to 12.1p a share.

Tesco expected retail adjusted operating profits in the current financial year of at least £2.8bn.

Shares in Tesco climbed 0.8% to 289.9p as markets opened this morning.

Morning update

Revenues have fallen at ecommerce group THG as attempted to turnaround its fortunes by exiting lossmaking categories and prioritised profitable sales.

However, the group highlighted a record adjusted EBITDA of £120.4m in the year ended 31 December 2023, up 48% on 2022.

Overall group revenues declined 8.4% to £2bn, with the bulk of the fall related to discontinuing a number of lossmaking categories. The remaining business saw sales fall 2.8% to £1.98bn as all three categories (Beauty, Nutrition and Ingenuity) suffered declines.

THG also posted an operating loss of £185.4m, compared with £495.6m in 2022.

CEO Matthew Moulding said: “In 2023, we made material progress against our strategic priorities, delivering significant profit growth following the support for our consumers through the cost-of-living crisis in 2022.

“This focus led to the group delivering record EBITDA after cash-adjusting items in 2023, higher than at the peak of the pandemic.”

He added: “The return to group revenue growth in Q4 was especially pleasing, and this momentum has continued into 2024.”

Drinks ingredients manufacturer Treatt has reported improving momentum in the first half following a subdued start to its new financial year.

Revenues declined 5.1% to £72.1m in the six months to 31 March 2024, with a year-on-year decline in Q1 because of destocking. Sales were 5.1% ahead in Q2.

Pre-tax profits are expected to be marginally ahead of the previous year at about £7.5m.

Interim CEO Ryan Govender said: “Treatt delivered a robust performance in the first half, making good progress in line with our strategic goals.

“We are particularly pleased with progress in China, where we continued to invest and consolidate our position, and in our higher margin premium categories where we have a number of active pipeline opportunities. Momentum in the second quarter was strong, and we recorded our highest-ever monthly revenue in March.

“As we enter the second half, we are encouraged by our solid order book and healthy sales pipeline.”

The group added it expected to hit profit expectations for the full year.

The FTSE 100 jumped 0.6% to 7,980.12pts this morning.

THG fell 0.3% to 67.7p on the back of its results, while soared 7.1% to 433.1p.

Other risers along with Tesco and Treatt included Premier Foods, up 4.1% to 152p, Virgin Wines, up 4% to 49.9p, Ocado, up 3.7% to 394.6p, and Supermarket Income REIT, up 2.4% to 78p.

Fallers so far included Naked Wines, down 1% to 57.9p, and Haleon, down 0.3% to 321.5p.

Yesterday in the City

The FTSE 100 fell 0.1% to 7,934.79pts yesterday.

Shares in tobacco firm Imperial Brands slumped 1.9% to 1,700p as it stuck its guidance for the first half and full year in a trading update.

Elsewhere fallers included Fever-Tree Drinks, down 4.2% to 1,109p, SSP Group, down 1.8% to 216.6p, and B&M European Value Retail, down 2.2% to 510.8p.

Virgin Wines shot up by 7.5% to 50p, while rival Naked Wines jumped 2.2% to 58.5p and THG rose by 2.8% to 67.9p.