Tesco’s first half profit up 11%.

30 09 2008

Supermarket giant Tesco today announced a 11% rise in its half-year pre-tax profits which rose to £1.44 billion from £1.29 billion last year with sales rising 13% to £25.6 billion. Like-for-like sales grew by about 7% which seems very good especially since consumers are cutting back on their spending and discount retailers like Aldi, Lidl, Netto, Iceland, Wilkinsons, etc. are attracting customers from large supermarkets.

It was reported earlier this month that Tesco’s market share had decreased by 0.2% to 31.5%. However, it still has a much greater market share when compared to stores such as Aldi which has 2.9% market share which allows Tesco to benefit from economies of scale. This means it can buy its stock in relatively large numbers at lower cost which would normally allow it to increase its profit margin, but in the current financial situation, it allows Tesco to reduce its prices thereby attracting shoppers looking to reduce their grocery bills.

Tesco introduced a new discount range of about 400 products aptly named “Discount Range” with the aim to compete with discount stores and offer customers value for money. Tesco’s chief executive Sir Terry Laehy claimed that sales of its discount range was rising faster than that of Aldi or Lidl.


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