* First half core retail profit up 16.6%
* Forecasts full year retail profit of 2.5-2.6 bln stg
* Launches 500 mln stg share buyback
(Adds details)
By James Davey
LONDON, Oct 6 (Reuters) - Tesco, Britain's biggest
retailer, raised its full-year outlook as it reported a 16.6%
rise in first-half core retail profit and increased sales
despite labour and supply chain disruption and tough COVID-19
related comparisons a year ago.
The group said on Wednesday its strong first-half
performance had enabled it to reduce net debt by 1.7 billion
pounds ($2.3 billion) since February, and it would therefore use
cash for a share buyback, with the first tranche of 500 million
pounds in shares to be bought by October 2022.
Tesco forecast a full-year 2021-22 adjusted retail operating
profit of between 2.5 billion pounds and 2.6 billion pounds
($3.40-$3.54 billion), having previously forecast a similar
outcome to 2019-20, when it made 2.3 billion pounds.
Tesco, which has a 27% share of Britain's grocery market,
made adjusted retail operating profit of 1.386 billion pounds in
the first half - ahead of analysts' average forecast of 1.262
billion pounds and 1.192 billion pounds made in the same period
last year.
First-half group sales rose 2.6% to 27.3 billion pounds,
while UK like-for-like sales rose 1.2%, having risen 0.5% in the
first quarter.
"We've had a strong six months; sales and profit have grown
ahead of expectations, and we've outperformed the market," said
Chief Executive Ken Murphy.
"With various different challenges currently affecting the
industry, the resilience of our supply chain and the depth of
our supplier partnerships has once again been shown to be a key
asset," he said.
Analysts say Tesco is benefiting from its huge online
business, from a pricing strategy that matches the prices of
German-owned discounter Aldi on around 650 products and the
success of its "Clubcard Prices" loyalty scheme which offers
lower prices to members.
However, chairman Tesco chairman John Allan told ITV last
month that supply chain disruption meant food prices could rise
by 5% this winter.
Tesco's share price has risen about 10% so far this year but
has underperformed both Sainsbury's and Morrisons
.
Morrisons, which is being taken over by U.S. private equity
group Clayton, Dubilier & Rice, is up 60%, while Sainsbury's,
also buoyed by takeover speculation, is up nearly 33%.
Tesco is also paying an interim dividend of 3.2 pence, in
line with the prior year.
($1 = 0.7351 pounds)
(Reporting by James Davey, Editing by Paul Sandle/Guy
Faulconbridge)
