Tesco makes hay

TESCO HAS muscled its way past the £2bn profit mark, reaffirming its position as the UK‘s leading food and groceries retailer.

The group posted underlying pre-tax profits largely in line with analysts‘ expectations of £2.029bn on worldwide sales of £37.1bn.

Profits were up more than 20% on the previous year, in spite of its strategy of aggressive discounting and the price war that has opened up with close rival Asda.

But the scale of Tesco‘s profits have attracted criticism from some in the farming community.

NFU Scotland president John Kinnaird, said: “It is no coincidence that increasing supermarket profits have arisen at the same time as margins at farm level have been dropping.

“I am seriously concerned that unless we have a meaningful political move to ensure there is fair trade between farmgate and plate, small businesses, families and rural economies will pay a hefty price.”

And the National Beef Association has warned the quest for returns has opened up a “gaping hole” in the supply chain as farmers struggle to make end meet.

“Everyone in the UK agricultural food supply sector recognises that the gap between retail profit and supply chain loss is so wide that the link between farm and supermarket cannot be maintained,” said chief executive, Robert Forster.

He claimed that every one of the UK‘s mainstream beef farmers was turning out cattle for significantly less than cost.

Despite the apparent strength of Tesco‘s year-end figures, the City received them with some reservations, and the share price fell slightly.

One analyst said that profits came in 1% below expectations, while the slow pace of growth in Tesco‘s overseas markets had raised some eyebrows.

Tesco‘s chief executive Terry Leahy moved to pre-empt criticism, saying: “Our new growth businesses – in international, in non-food and in services – have contributed as much profit as the entire business was making in 1997.”