Tesco delivered a “strong sales performance” across the group for the 52 weeks ended 24 February 2024 (FY 23/24) with a 7.2% constant rate increase to $61.5bn ($78.13bn) from £57.2bn in the same prior period.

The supermarket also reported an adjusted operating profit of £2.8bn compared to $2.5bn the year before, which was a 12.7% constant rate increase.

Tesco’s chief executive Ken Murphy said: “This strong performance reflects the hard work of colleagues across the whole Tesco Group, and their commitment to serving our customers. Customers are choosing to shop more at Tesco, which is reflected in growing market share as they respond to the improvements we’ve made to the value and quality of our products.”

GlobalData senior retail analyst Eleanor Simpson-Gould believes Tesco has produced a decent set of results, despite facing a challenging year that has seen the supermarket go face-to-face with discount brands.

She explained: “The supermarket retailer reported that UK like-for-like sales rose 7.7% for the year ending 24 February 2024, though with food inflation around 15% in 2023, this would indicate that Tesco did suffer a decline in volumes during this time as shoppers traded down.”

Simpson-Gould pointed out, however, that while home and clothing only account for 7% of total UK sales, these sectors continue to “hinder” Tesco as sales decreased by 3.4% for the period.

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She said: “Given the weaker performance, Tesco’s efforts to exit from unprofitable markets such as large electricals and adult shoes and the acquisition and launch of Paperchase late last year are a good first step, but further work is needed to bring these ailing categories back to growth.”

GlobalData’s Simpson-Gould also believes Tesco should add third-party trials to support its non-essential offering.

Tesco FY 23/24 results

  • Group sales for FY 23/24 (excluding VAT and fuel) were up 7.4% on an actual rate basis from £57.2bn to $61.5bn.
  • Adjusted operating profit was $2.8bn in FY 23/24 compared to $2.5bn in FY 22/23.

Tesco outlook

For the 2024/25 financial year, Tesco expects retail adjusted operating profit of at least £2.8bn.

In addition, it expects total adjusted operating profit from the retained Tesco Bank business of around £80m, which includes a part-year amount of partnership income, based on the completion of the transaction towards the end of this calendar year. It expects to generate retail free cash flow within its guidance range of £1.4bn to £1.8bn.

Simpson-Gould pointed out that with inflationary pressure easing, Tesco is entering a new financial year where it can expect to see a normalisation of sales growth.

However, she added that its outlook for the new financial year is cautious despite falling inflation as the grocer recognises that consumers remain sensitive to price.

“With Tesco losing Lidl’s legal challenge to change its Clubcard branding, Tesco has the opportunity to draw deeper focus on its loyalty scheme. Passing on cost savings to customers will remain a key priority to keep the pressure on competitors and drive volume growth.”