Tesco stock jumps after profits double

Supermarket giant also announces it’s to pivot to rail freight in light of driver shortage.

Tesco’s stock price enjoyed healthy gains on Wednesday, after it reported strong earnings for the first half of 2021 and raised its full-year earnings forecast.

The United Kingdom’s largest retailer made a pre-tax profit of £1.14bn ($1.5bn) in the first of half of the fiscal year, more than double the £551m reported a year earlier.

Sales increased by 3% to £27.3bn in the six months to 28 August. The company’s online business grew by 2.3%, while brick and mortar stores suffered slightly as working from home continued to reduce traffic in commuter areas. 

Company to resort to rail frieght

The company highlighted the pressure put on its supply chains by Covid-19 and the aftermath of Britain’s departure from the European Union, but said it was able to leverage its supplier relationships and distribution capacity to maintain availability. 

In light of the shortages seen across Europe, Tesco offered a £1,000 sign-up bonus for new heavy goods vehicle drivers. With the crisis continuing, the company announced its intention to pivot towards rail freight. From November, the supermarket giant will add two new UK food transport train services to the existing five that run every week.

Chief Executive Officer Ken Murphy stated: “This is a fantastic story from a sustainability point of view but it has really come into its own helping our supply chain resilience.”

Eager to dispel fears of a Christmas supply crisis, Murphy said that by the end of the year the number of containers carrying fresh food from Spain to the UK will have increased from 65,000 to 90,000. He added that Tesco has ordered 10% more turkeys than last year and will take on 30,000 temporary staff in the run-up to the holiday period. 

Buyback scheme

Increasing the company’s full-year guidance from £1.9bn to £2.6bn, Tesco also announced a £500m share buyback scheme for investors. 

Although its stock has risen by 17% in the past six months, Tesco continues to trade below the level at which it stood before the 28% plunge that it suffered in mid-February. 

The latest profit came in spite of the company having to pay £193m to shareholders as part of a legal case linked to an accounting scandal that engulfed it in 2014.

By 13:00 BST (UTC+1), Tesco traded up by 5.8% at 267.79 pence, 10.7% below its 2021 starting level.

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