Tesco posts 28.3 per cent profits slump

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Britain’s biggest supermarket Tesco has revealed half-year profits dropped by more than a quarter, as it still struggles to grow market share amid the bitter industry price war.

The supermarket price war has come at the expense of profits with Tesco revealing a group pre-tax profit of £71m down 28.3 per cent on the same period last year.

The company also confirmed its pensions deficits has jumped by £3.3bn to £5.9bn “due to lower bond yields”.

Tesco is still recovering from an accounting scandal as well as reporting a record loss last year.

Last month, three former Tesco executives denied charges in relation to the £326m accounting scandal at the supermarket.

Despite the drop, Tesco’s group like-for-like sales were up 1 per cent in the half-year to 27 August and in the UK they grew by 0.6 per cent, the company said.

Shares in Tesco have jumped 10 per cent after it reported the sales rise.

Dave Lewis, Tesco chief executive, said a plan to slash costs by £1.5bn over the next three years to invest in its customer offering would help get profitability back on track.

Lewis described the results as “further strong progress” as the retailer rebuilds profitability “in a sustainable way”.

“Whilst the market is uncertain, we have made significant progress against the priorities we set out two years ago, stabilising the business and positioning us well for the future,” Lewis said in the statement.

Himanshu Pal, Vice President at Kantar Retail, said another period of improved like-for-like sales for Tesco has vindicated some of the structural changes Dave Lewis has made.

However, he warned that Tesco continued to lose shopping trips to German discounters Aldi and Lidl.

“The recent disclosure around its pension deficit is likely to accentuate the focus on cash management fuelling further speculations around divestments of international markets in Southeast Asia and Central Europe,” he said.

Tesco also sparked controversy with its fresh “farm food” range, which has proved popular with shoppers even though the products are named after farms that do not exist.

The National Farmers Union (NFU) formally complained to Trading Standards over the use of fake farm branding by supermarkets on some food products.

It singled out Tesco and its seven made-up farm brands, which launched earlier this year.