Tesco shares jump as supermarket delivers strong US performance
By Angela Monaghan
Last Updated: 4:50pm BST 15/04/2008
Shares in Tesco, Britain's biggest supermarket chain, closed up 7pc today after it revealed growth throughout the business and said it was "confident" about the year ahead.
It has confounded its critics with a strong performance from its US business, Fresh and Easy, where sales are ahead of target.
There are now 60 Fresh and Easy stores since the first one was opened in November, and the future was looking uncertain after Tesco was understood to be halting the rollout of new stores in America.
Today, however, Tesco said: "Sales are ahead of budget and sales densities are already higher than the US supermarket industry average, with our best stores exceeding $20 per square foot per week."
It plans to open 150 new stores in the US this year. Anlaysts at Kaupthing said that it was a sign Tesco was "fighting back" over its Fresh and Easy business.
Tesco was in bullish mood this morning as it revealed growth across all of its businesses and said that it had seen a strong start to the year, despite the credit crunch that is now unfolding across the high street.
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Like-for-like sales in the UK, the biggest part of its business, grew 3.5pc excluding petrol in the year to February 23, while pre-tax profit rose 5.7pc to £2.8bn.
Group sales rose 11pc to £51.8bn, with the majority of the growth - 54pc - generated within Tesco's international business.
Tesco's ambitious expansion plans continue, as the supermarket plans to open 11.5m sq ft of new space this year, 80pc of it outside the UK.
Last year China contributed £702m to sales, or 6.4pc of international sales growth, and made a "small" profit.
Analysts at Citigroup said that a £207m property deal concluded with The Prudential in February showed that there was still an appetite for Tesco's property portfolio, now valued at £31bn.
The results were in line with what the market expecting, and despite the credit crunch's negative impact, Tesco's chief executive Sir Terry Leahy said he was positive about the year ahead.
He said: "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."
Prices at Tesco rose overall by 1.2pc last year, as the supermarket balanced its 'lowering prices' for customers pledge with the rising costs of commodities.
The board proposed a final dividend of 7.7p a share, to be paid on July 4, taking the total dividend for the year to 10.9p a share, an increase of 13.1pc.
Shares rose 28.5p to 419.5p.
Fresh & Easy Buzz Editor's Note: Read our analysis of Fresh & Easy USA based on today's Tesco PLC's annual sales and profit report here.