UK supermarket giant Tesco says profit dives by third

Profit after tax slumped 32% to $553 million, 479 million euros in 6 months to the end of August.

LONDON (AFP) - Tesco, Britain’s biggest retailer, said Wednesday its purchase of wholesaler Booker helped support its underlying performance although first-half net profits sank as the supermarket group had booked an exceptional gain last year.

Profit after tax slumped 32 percent to £426 million ($553 million, 479 million euros) in the six months to the end of August, Tesco said in a results statement.

That compared with £628 million in the same part of the previous year, which was boosted partly by a large gain on the sale of its Korean operations.

Tesco added that its latest underlying operating profit jumped 24 percent to £933 million, helped greatly by the recent acquisition of British wholesaler Booker.

However this figure undershot analysts’ consensus forecast, contributing to Tesco’s share price tanking 8.3 percent to 215.70 pence on London’s benchmark FTSE 100 index, which was up 0.4 percent overall.

"Tesco’s Central European operations suffered a setback as trading restrictions on Sundays and public holidays reduced the number of days its stores could open for business in Poland and Slovakia," noted Laith Khalaf, senior analyst at Hargreaves Lansdown.

"It’s commonly thought that Sunday trading restrictions displace rather than deter consumer activity, but Tesco’s experience suggests otherwise, for the big supermarkets at least.

"The Central European business makes up just over 10 percent of group sales, so Tesco can probably take this one on the chin while its UK business is ticking along so nicely," Khalaf added.

Sales on a like-for-like basis, which strips out the impact of new floor space, climbed 2.3 percent in the second quarter.

"We have made a good start to the year," chief executive Dave Lewis said in the earnings release.

He added that the second quarter was driven mostly by solid performance in the UK and Ireland.

Tesco bought Booker for £3.7 billion earlier this year, in a radical repositioning of the UK retailer that has been troubled in recent years by an accounting scandal -- and fierce competition from supermarket rivals and discount chains.

Booker is Britain’s the country’s biggest cash-and-carry operator and sells goods to more than 503,000 customers -- including grocers, pubs and restaurants across the country.

Tesco meanwhile recently launched a rearguard action against German-owned discounters Aldi and Lidl with the launch of discount food store chain Jack’s.

The British supermarket giant has additionally finalised a purchasing alliance with French titan Carrefour to increase their leverage with suppliers -- and enable them to slash prices on the supermarket shelves.

Tesco, the world’s third-biggest supermarket chain after Carrefour and global leader Wal-Mart of the United States, also has global operations dotted elsewhere including China, India, Ireland, Malaysia, and Thailand.

Meanwhile in Britain, Sainsbury’s and Walmart-owned Asda unveiled merger plans in April to create a retail king that would leapfrog Tesco. That merger will however face an in-depth competition probe.