Tesco rings up 21% profits leap

SUPERMARKETS group Tesco cashed in on the sweltering summer, extending its lead over food retail rivals with a jump in first-half profits of more than 21%, taking them to £661m.

Today's figures are comfortably ahead of most City expectations and come on the back of further impressive growth in Tesco's core home market, with like-for-like sales rising by 6.3%, up from the 5.8% reported over the first quarter. The shares added 11 1/2p to 240p, their highest since July last year.

Chief executive Sir Terry Leahy called it an 'outstanding' first half, adding: 'Customers have told us what they want and we have been doing a better job for them right across the group.'

Sales were given a boost by the record-breaking temperatures, said Leahy, although that was not the major factor in the sales rise. 'We have done some things better,' he said.

Non-food sales also did well, with the group's clothing business, for example, growing at six times the rate of the market. 'We are winning customers from all parts of the retail sector,' said Leahy.

But, in what looked like a last-minute plea ahead of the Safeway ruling, he said Tesco's share of the total retail market is 'just 12.3% and there is a lot left to go for'.

Total sales for the 24 weeks to 9 August were up by 17% to £14.9bn, including a 30% jump in the overseas contribution, to £3bn. International profits were ahead by 66% to £98m. The interim dividend is raised by 10.7% to 2.07p.

Overall sales in Britain were up by 14.2% to £12bn, of which 7.9% came from new stores. The group will add a further 22,000 new jobs to its existing 307,000 worldwide total this year.

Also reporting interim results this week will be Wm Morrison, the Bradford-based supermarkets chain. It is also expected to have enjoyed strong trading over the first half.

Meanwhile, supermarkets industry remains on tenterhooks ahead of the ruling by Trade and Industry Secretary Patricia Hewitt on the Safeway bid scramble.

The Competition Commission handed its hefty report to the DTI last month and it had been hoped the verdict would come this month. But the uncertainty could continue into next month, with recent reports suggesting that the Government could wait until after the party conference season in an effort to avoid any additional flak over what will inevitably be a controversial decision.

Morrison remains the likely winner in the race for Safeway, as it has significantly less store overlap than rival bidders Tesco, Sainsbury's and Wal-Mart-owned Asda.

Monaco-based billionaire Philip Green, who owns Bhs and Arcadia, is not part of the inquiry and is free to bid at any time - though, as with his rivals, he is awaiting the ruling.

City spread betting specialist Cantor Index has made Morrisons and Asda 3-1 joint-favourites to win control of Safeway. Philip Green is at 7-2, Tesco 10-1 and Sainsbury 25-1.