Tesco profits top £2 billion

Profits at Tesco have topped £2 billion for the first time as the company posts another year of double-digit sales growth and ups the pace of international expansion.

Tesco, whose market share continues to expand despite a toughening competitive environment, yesterday reported underlying pre-tax profit of £2.029 billion for the year to February 26, matching market forecasts of £2.026 billion.

Group sales rose 12.4 per cent to £37.1 billion, but Chief Executive Terry Leahy was cautious on whether this performance could be maintained.

"We've got a very good strategy for growth in the future. We can grow for some time - but not necessarily at this rate, we don't plan to grow at this rate," Mr Leahy said yesterday.

The stock fell more than one per cent in early trade.

Tesco's sales have almost doubled in the past five years as the company wrested market share from Sainsbury and others, adopted a successful low-price strategy and moved into the non-food lines that offer the best growth in the sector.

In the UK, where Tesco chalks up about four-fifths of its total sales, turnover increased 11.9 per cent to £29.5 billion, with international operations in Asia and central and eastern Europe posting a 13.1 per cent rise to £7.6 billion.

Tesco's rapid expansion, dominant market position and diversification into areas such as financial services and telecoms has led to criticism from consumer groups and some suppliers, saying the company has become too powerful.

Mr Leahy disputed this was a problem, and said there was particular scope for growth in non-food lines, where the group enjoyed a 17 per cent UK sales increase in the past year.

"We've seen that non-food is growing faster (than the group at large) - we would hope we could keep up the good rate of growth, there's plenty to go for," he said.

As competition from the likes of Sainsbury and Wal-Mart's Asda intensifies and Tesco looks to develop new markets, international operations will also become a target for future expansion.

"We saw good growth in our international business. Next year, the opening programme will accelerate outside the UK," Mr Leahy said, adding there would be a particular focus on central European expansion.