Supermarket profitsTesco reveals record profits

26 April 2006

Supermarket giant Tesco has further strengthened its grip on the retail sector after reporting record profits of GBP 2.21 billion - a jump of almost 17 per cent on the previous year.

The company, which overtook Sainsbury's as the UK's biggest supermarket chain in 1995, took GBP 32.7 billion in sales from UK shoppers during the 12 months before March this year.

It's been widely reported that GBP 1 in every GBP 8 spent in UK shops is spent at Tesco.

OFT has concerns

News of the latest profits comes as the four major supermarket chains wait to hear whether they'll face a probe into anti-competitive practices in the grocery sector.

The Office of Fair Trading has raised concerns over pricing tactics and the alleged use of 'land banks' to prevent rival retailers opening new outlets.

But Tesco Chief Executive Sir Terry Leahy denies that Tesco is holding on to a 'land bank' of potential supermarket sites.

He told the BBC Radio 4 Today programme: 'This is a complete red herring. It's nonsense. We only own land in order to develop for Tesco and if we can't develop for Tesco we sell the land on.'

Challenged on claims that, if stores were built on all Tesco's land, the company could increase its share of the market from 29 per cent to 45 per cent, Sir Terry responded: 'Complete nonsense, that's totally inaccurate. There's no such thing as a land bank. Tesco is a growing business, we are growing here in the UK and we are actually growing more rapidly internationally.'

Tesco 'juggernaut'

But Friends of the Earth said it was 'time to put the brakes on the Tesco juggernaut'. Campaigner Sandra Bell said: 'The government and competition authorities must recognise the value of small shops to local communities and create an environment that allows retail choice to flourish.'

Retail analyst Nick Gladding of Verdict Research said Tesco's continued success was down to its understanding of the consumer.

He said: '[Tesco] has a very good understanding of what people want from it. It became more price competitive and realised that lower prices were a very effective way of increasing customer share. Lower prices are compensated for by higher customer numbers.'