Tesco profits top £2bn

TESCO has become the first UK retailer to post profits of more than £2bn. The company, which now accounts for almost one pound in three spent in Britain's supermarkets, saw profits soar to £2.029bn, up 24% on a year earlier and in line with the City's expectation.

It has pledged to continue its relentless expansion with plans to open up to 20 hypermarkets a year. It will also create 25,000 jobs around the world this year.

Group sales rose 12.4% to £37.1bn in the year to 26 February, while UK sales increased 11.9% to £29.5bn driven largely by 'non-food' items, up 17% to £6bn. Clothes sales, which includes the brands Cherokee and Florence & Fred, were up 28%.

Tesco and Asda have led the way in expanding into fresh retail areas, piling their stores high with televisions and DVDs and increasingly serving as newsagents. The growth has taken its toll on High Street stores, such as electrical goods retailer Dixons, newsagent WH Smith and chemist Boots.

In the UK, Tesco's 'home entertainment' sales were up 20% while the stationery, news and magazines saw 26% growth and health and beauty products sold 13% more.

Tesco Personal Finance also delivered an 'excellent performance', withtotal profit increasing by 26.5% to £202m. The group, which launched TPF only seven years ago, shares the money equally with its finance partner Royal Bank of Scotland. It now has 4.9m customers, up 700,000 on a year ago, with 1.7m taking credit cards and 1.4m with car insurance policies.

Tesco, which overtook Sainsbury's as market leader in the mid-Nineties, now receives one pound in eight spent in the UK.

Chief executive Terry Leahy said: 'These results again demonstrate the broad appeal of the Tesco brand. They also show that our new growth businesses - in international, in non-food and inservices - have contributed as much profit as the entire business was making in 1997.'