Tesco operating profits slump 55% but 'improvement' hailed in like-for-likes

• Tesco operating profits fall 55% to £354m
• Statutory pre-tax profit up to £74m following £19m loss last year
• Boss Lewis hails “improvement” in like-for-likes during second quarter
• Tesco will retain Dunnhumby data arm

The supermarket giant said it made an operating profit before one-off items, its new headline performance measure, of £354m in the 26 weeks to August 29, down from £779m the previous year.  

Tesco reported a statutory pre-tax profit of £74m during the period, up from a £19m loss last year, despite a 1.1% dip in like-for-like sales. Profits in its core UK and Ireland business slumped 69.4% to £166m.

The grocer hailed “further improvement” in like-for-like sales during its second quarter and said the number of transactions had increased 1.5% during the half year. Sales volumes in the half year also rose 1.4%.

Its international arm returned to sales growth as like-for-likes edged up 1% during the 26-week period. Tesco said both its European and Asian operations reported “positive” sales growth during its second quarter.

Portfolio review

The supermarket added that its portfolio review had now been “concluded” and it would retain its stake in the Dunnhumby data business.

Tesco had initially been hoping to raise around £2bn from the sale of its data arm, but its value plunged to around £600m as talks with interested parties broke down.   

Boss Dave Lewis told journalists this morning that the decision represented the “best value” for shareholders and that he would “never sell an asset below its actual worth.”

Chief executive Lewis added: “We have delivered an unprecedented level of change in our business over the past 12 months and it is working. The first half results show sustained improvement across a broad range of key indicators.

“In the UK, we continue to improve all aspects of our offer for customers, resulting in volume growth which is allowing us to create a virtuous circle of investment.

“Our transformation programme in Europe has accelerated growth and reduced operating expenses and in Asia we have gained market share in challenging economic conditions.

“We have concluded our portfolio review with the sale of Homeplus, our business in Korea, enabling us to take a significant step forward on our priority of strengthening the balance sheet. Further progress will be driven by continuing to increase the level of cash generated from our retained assets.”