Tesco profits soar

tesco's tills have rung up record profits of more than £1.7billion, a rise of 22 per cent.

The supermarket's pre-tax profits - equivalent to almost £55 a second - were up sharply from the previous year's £1.4billion. Despite a marked recent slowdown in consumer spending, sales in the 53 weeks to 28 February rose 19 per cent to more than £33billion.

Tesco's £3million-a-year chief executive, Sir Terry Leahy, said: "Today's figures demonstrate what a great British success Tesco is."

The figures pleased the City but will strike fear into virtually every major retailer in the country. There are concerns the group will use its vast financial strength to launch a devastating price war against Sainsbury's, US-owned Asda and William Morrison, the new owner of Safeway. It has already announced £70million in savings for shoppers, while its highly successful move into other areas such as DVDs, clothes and books has also been blamed for problems at other retailers such as Marks & Spencer and WH Smith.

Tesco now accounts for about £1 in every eight spent by British consumers.

The figures confirmed the success of Tesco's strategy of introducing hundreds of cut-price non-food lines into its stores. They include its low-cost clothing range, with jeans from as little as £4 a pair.

The growth in profits has also been fuelled by an aggressive policy of expansion into town and city centres through buying up corner shops and converting them to its Metro and Express formats. However, the strategy has been criticised for strangling high-street diversity. A new survey reveals that in 108 areas of Britain, including Epping and Buckingham, Tesco has a near monopoly on food. In a further 104 places it accounted for more than 50 per cent of grocery spending.

Today's figures are unlikely to mark the high point of Tesco's success story. City analysts are forecasting a further sharp rise in profits to around £1.9billion this year and beyond £2billion in 2005. Profits only passed the £1billion barrier in 2001.

The company is now Britain's 12th biggest, worth almost £19.5 billion, putting it ahead of giants such as Unilever and BT. Its shares are among the most favoured in the City.

Only a handful of British banks, oil and drugs companies have ever made more profit in a year.