Tesco continued on its path to recovery, reporting a return to full year profit and its first quarterly like-for-like sales rise in the UK for three years. .

In the 12 months to 27 February, the group posted a statutory pre-tax profit of £162m, compared to a loss of £6.3bn in the prior year which was due mainly to a huge property write down. Operating profits before exceptional items rose 1.1% to £944m, slightly higher analyst’s forecasts. Group sales inched up 0.1% to £48.4bn. 

In the UK, Tesco’s like-for-like sales over the year were down 0.6%, although the figure turned positive in its fourth quarter for the first time in three years, growing 0.9% following improved trading over the Christmas period. Its business in Ireland also saw a marked improvement in performance in the final quarter with like-for-like sales up 1%, having fallen in all three of the previous quarters. 

The UK & Ireland division saw operating profits before exceptional items increase 1.4% to £505m on total sales up 0.5% to £37.2bn. Tesco said it was seeing improving performance in all its formats and categories, benefitting from better service, a simpler range, record levels of availability and lower prices. The group revealed that it had now reviewed every one of its 33 food categories, reducing the number of products by 18%, whilst introducing 2,000 new lines. Tesco also completed its UK management restructure, with a 25% reduction in roles, whilst it closed 60 unprofitable stores. 

Tesco’s international division also made good progress with like-for-like sales performance improving throughout the year and growing 3.8% in the final quarter (+4.1% in Europe and +3.5% in Asia). International operating profits rose 11.4% to £277m on sales up 1.8% to £10.2bn. 

Tesco’s Chief Executive Dave Lewis said the group had "regained competitiveness in the UK", adding: “Our balance sheet is stronger and we are making good progress in rebuilding trust in Tesco and our investment case.” 

However, he remained cautious on the year ahead, warning the market is still “challenging, deflationary and uncertain”. 

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