Tesco annual profit rises to £2.65 bn despite UK downturn

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Britain's biggest retailer Tesco on Tuesday posted a 14-percent rise in annual net profits to £2.65 billion (3.0 billion euros, $4.3 billion) as strong sales abroad offset weakness at home.

Supermarket giant Tesco, which recently changed its chief executive, said profit after tax for its year to February 26 compared with net income of £2.33 billion in 2009-10.

"I am pleased with our strong overall performance in the face of some challenging conditions and we are well-positioned, with multiple opportunities to deliver long-term growth and rising returns," new chief executive Philip Clarke said in the group's earnings statement.

"Asia and Europe made excellent progress, contributing nearly 70 percent of our profit growth in the year. The momentum in the USA is building but still has some way to go."

Going forward, Tesco said its main objective would be to keep growing its British operations, which struggled in the final quarter as Britons faced up to a tough economic climate.

Tesco partly blamed record petrol (gasoline) prices and the government's austerity measures for a disappointing British performance.

"We didn't achieve our planned growth in the year," the company said.

"In some specific countries -- not least of course the UK -- as consumers deal with higher taxes, public sector contraction and rising fuel costs, demand growth remains subdued.

"In these markets, we are assuming that the retail environment will remain challenging in 2011," said Tesco, which is the world's third biggest retailer behind US giant Wal-Mart and French supermarket group Carrefour.

Tesco's share price was down 0.79 percent at 397 pence in reaction to the results, underperforming London's benchmark FTSE 100 index which rose 0.52 percent to 5,900.78 points around midday.

"Tesco's international spread has again come to the rescue as its home market struggles to come to terms with the age of austerity," said Richard Hunter, head of UK equities at Hargreaves Lansdown.

The company, which has more than 5,000 stores in 14 countries, said annual group sales increased eight percent to almost £68 billion.

Pretax profit climbed 11.3 percent to £3.54 billion, ahead of market expectations of £3.45 billion, according to Dow Jones Newswires.

Tesco enters a new era after Terry Leahy last month stepped down as chief executive following 14 years at the helm.

Leahy turned Tesco from a solid British food retailer into a worldwide operation also selling electrical items, clothes and financial products.

His replacement Clarke has worked at Tesco since 1974, when he joined as a part-time assistant while still at school.

Clarke became chief executive after heading the group's Asian, European and IT operations and earlier this month oversaw Tesco's entry into the online market for second-hand car sales.

© 2011 AFP

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