Tesco will give a “thank-you” bonus to more than 220,000 workers after the profits of the supermarket rose by nearly 160 percent last year.
The largest private employer in Britain announced that it will give out around £70 million, or 1.5 percent of annual salaries, to employees who are paid hourly at its stores, Customer Fulfilment Centres and Customer Engagement Centers. This is equivalent to around £300 per full-time worker.
Ken Murphy, 57 years old, chief executive of the chain, said that the payment reflected “the hard work of colleagues” in helping the business achieve sales and profit growth.
The FTSE 100 firm announced that it would buy back £1billion of its own shares in the coming year as part of its commitment “to balance the needs of all stakeholder to create sustainable long-term value”. The retailer will fund a quarter of its share repurchase plan with a Tesco Bank dividend, which the bank agreed to sell this year to Barclays in a deal that released £1 billion for the supermarkets.
Tesco has also predicted higher annual profits. This boosts confidence in the company’s shares which have increased by 11% in the last year. Last night, they closed up by 3.3%, or 9 1/2p.
Tesco, the owner of the Booker wholesaler, and which operates stores in Ireland, Eastern Europe, and the UK, has announced a rise in profits following a “significantly lower” inflation rate that allowed it to reduce prices, and therefore attract budget-conscious customers.
The company will give out almost £70 million as “thank-you” bonuses to more than 220,000 hourly employees
The group’s pre-tax profit jumped by 159.5 percent to £2.29billion in the year to February 24. This was partly due to a £982m impairment charge in the previous fiscal year. Retail adjusted operating profits rose by 10.9% to £2.76billion and adjusted operating profits increased by 13.0% to £2.83billion.
The revenue, which includes fuel, increased by 4.1 percent to £68.1 Billion during the same period. This is up from £65.3 Billion. Retail sales like-for-like grew 6.8% for the year, as lower inflation rates encouraged shoppers to purchase more products. This offset a 17.2 percent drop in fuel sales due to falling prices for petrol and diesel.
In the face of the rising cost of living, the grocery chain drastically reduced its prices in order to compete with German discounters Aldi, Lidl and others. It claimed that it was the cheapest full line grocer in the last 16 months. The company has cut the prices of about 4,000 items by an average of 12 percent over the past year.
According to Kantar, a research firm, Tesco’s share of the market increased by another 0.4 percentage points in the four-week period ending March 17. Aldi held 9.8 percent and Lidl 7.8 percent, respectively.
Murphy stated that Tesco was also taking share from the “premium retailer”, which was thought to be Waitrose. Murphy added that Tesco was now cheaper than Asda but still lagging behind its German rivals.
Murphy stated that Tesco was still facing “threats in all directions”, including “a resurgent Morrisons” since the struggling grocery store bought a new leader. We are constantly vigilant to remain competitive. “The battle for shopping baskets can be fierce.”
Tesco has dropped the blue-and-yellow logo it used to promote Clubcard, its loyalty program. The company lost an appeal after a court ruled that they had copied Lidl’s design. Murphy said the rebrand would cost in the “mid-to-high-single-digit millions” and that the new logo would be revealed within the next six weeks. Last year, Tesco completed 70 percent of its transactions using Clubcards. The group has more than 22 millions Clubcard households across the UK.
Murphy stated that the grocer’s sales of premium “Finest”, a range of gourmet foods, had increased by 15,7% in the past year. Finest sales for the period exceeded £2 billion.
Tesco announced that it would make £500,000,000 in savings by focusing on areas like warehousing and waste management, distribution, and energy consumption. It stated that it does not anticipate significant job losses.
It expected a retail adjusted operating income of “at least”, £2.8 billion in 2024-25. The forecast also included retail free cashflow between £1.4 and £1.8 billion.
Imran Nawaz is Tesco’s Chief Financial Officer. He said that while the company’s profit forecast was conservative, the year had just begun and it would be possible to upgrade it.
James Grzinic is an analyst with Jefferies. He said that Tesco’s performance in the past year and its “typically conservative approach to guidance”, confirmed the progress of the UK market leader.
Unite, a union, has taken another shot at supermarkets for “raking mountains of money while families struggle to feed their children because of the sky-high price”. Last year, supermarkets were under fire for allegedly profiting from the rise in food prices. Tesco shares are trading near ten-year and one-year highs. This has left the supermarket open to allegations of price gouging.
Murphy denied such claims. He said that you have to take care of all stakeholders, and also leave the business better than when you started. The company has been “consistently lower” in its prices. He noted that Tesco “pays considerably more tax” than it did a few short years ago.
It was announced this week that Jason Tarry (56), the former CEO of Tesco UK & Ireland, will join The John Lewis Partnership in its role as chairman. Murphy called it a “great choice”. He’s an excellent retailer, and I believe he will do a fantastic job.”
Matthew Barnes, the 50-year-old former Aldi UK & Ireland CEO, has replaced Tarry at Tesco. Murphy said Barnes “landed really well” and had spent a lot time listening to and getting acquainted with the Tesco business.
Tesco’s boss, Isabella Fish (Writer), warns that inflation is “sticky” on popular items like chocolate, coffee and potatos.
Ken Murphy, the chief executive of the grocery store, told reporters that the price of certain key commodities continued to increase due to supply issues caused by weather, even though inflation in other areas had decreased.
Prices of cocoa have nearly doubled in the last two years as the weather and rising temperatures are damaging crops in West Africa, where the majority of the world’s cocoa is produced. According to The Grocer, the price of some potato lines has increased by up to 22 percent.
Murphy stated that the decreases in other prices, such as cocoa, potatoes, and coffee, had been offset in large part by inflation. This had allowed the supermarket to increase its annual profits.
Murphy stated that food inflation (which measures the rate of increase in food prices over time) had “lessened significantly”. We are aware that many customers are still struggling, so we’ve worked hard to lower prices.
The rate of food price inflation dropped to 3.7% last month from 5%, the lowest since April 2022. According to the British Retail Consortium (BRC) and NIQ, food prices decreased by 0.3% on a monthly basis.