The Tesco bubble shows no sign of bursting, as the group this morning announced an 11.8 per cent increase in annual profits for 2007 to £2.846 billion.
In a difficult retail market, the UK's largest retailer met analysts' forecasts, with group sales up 11 per cent to £51.8bn.
The UK story saw Tesco’s core business perform well in challenging market conditions. The trading statement said: “UK sales increased by 6.7 per cent to £37.9bn (last year £35.6bn) with like-for-like growth of 3.9 per cent (including volume of 2.0 per cent) and 2.8 per cent from net new stores. Excluding petrol, like-for-like sales grew by 3.5 per cent.
“In our stores, we saw modest inflation of 1.2 per cent for the year as a whole, with our continued investment in lowering prices for customers being offset by the strength of market prices for commodities and some seasonal fresh foods. Further rises in commodity food prices in the second half saw inflation rise to just over two per cent in our fourth quarter with food price inflation being offset by continuing deflation in non-food categories.”
More than 50 per cent of group trading profit now comes from its overseas operations, and international sales were up 25.3 per cent.
The expansion drive overseas will continue throughout the next financial year, with plans to open 11.5 million square feet of new store space - 80 per cent of that outside the UK.
Some 150 Fresh & Easy stores are expected to open in the US by the end of the year.
Tesco has been drawn into defending its plans to expand in the US, claiming against criticism on both sides of the Atlantic that its Fresh & Easy stores there have been "well received by customers” and are “growing strongly".
Group chief executive Terry Leahy said: "The breadth of the group and the strength of our business model have enabled Tesco to deliver another year of double-digit sales, profit and earnings per share growth - in challenging market conditions.
"We begin the new financial year confidently - with a good start in the UK, excellent progress in our established international markets and promising early performance from our investments in future growth, particularly in the United States, China and Turkey," he added.
UK sales excluding fuel are up four per cent in the first five weeks of Tesco’s new financial year.
