Criticism as Tesco’s profits soar

Tesco’s turnover has increased again dramatically, but its share price dipped as chief executive Terry Leahy said increasing oil costs could hit future profitability at the retailer.

UK sales for the 24 weeks ending 13 August increased 11% to £14.6bn, while operating profit grew 19% to £801m. Like-for-like sales rose 8.2%, although competition saw prices fall by 2%.

The retail giant now commands an estimated 30.5% share of the UK grocery market, up from 28% a year ago.

Criticism was swift from farming groups, with the Farmers Union of Wales calling for protection from overmighty supermarket chains.

“The code of conduct is inadequate – the FUW has always insisted that we need legislation to protect the rights of suppliers,” said president Gareth Vaughan.

“Unless legislation is introduced the growing power of the supermarkets will mean that suppliers’ margins will continue to be squeezed to guarantee even greater profits for the shareholders of the multiple chains.”

NFU Scotland milk committee chairman Willie Lamont, a dairy producer from Dalry, Ayrshire, said: “There is no doubt that oil prices are driving up costs throughout the supply chain

“But Tesco won’t get a shred of sympathy from me for complaining about that at the same time as announcing £908 million in profit – tens of millions of which come from milk and dairy product sales.

“The supermarkets and processors just pass their own costs down the chain, and farmers sit right at the bottom.”

Tesco’s stores abroad now account for more than half of its total floor space, but they still only contribute £163m to the group’s operating profit.

That was still a rise of 16% at constant interest rates, on the back of sales of £4.2bn.

Non-food sales in the UK also rose dramatically, up 13% to £2.8bn.