* 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
* Shares rise 5%
(Adds details, shares)
By James Davey
LONDON, Oct 6 (Reuters) - Tesco, Britain's biggest retailer,
raised its full-year earnings forecast on Wednesday after the
unmatched scale of its store and online operations helped it
outperform rivals in the first half and deliver a
better-than-expected 16.6% increase in profit.
British retailers are battling supply chain disruptions and
labour shortages. Supermarkets also face tough comparisons
against record sales during COVID-19 lockdowns.
Tesco, however, increased sales in the period.
"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."
The group said on Wednesday the strong performance had
enabled it to cut net debt by 1.7 billion pounds ($2.3 billion)
since February, and so it could afford to buy back shares, with
the first 500 million pounds to be bought by October 2022.
Its shares rose 5% in early deals, topping the FTSE 100
index.
Tesco forecast a full-year adjusted retail operating profit
of 2.5-2.6 6 billion pounds, having previously forecast a
similar outcome to 2019-20, when it made 2.3 billion pounds.
The company, with a 27% share of Britain's grocery market,
said it made an adjusted retail operating profit of 1.39 billion
pounds in the first half - ahead of analysts' average forecast
of 1.26 billion pounds and 1.19 billion a year earlier.
Group sales rose 2.6% to 27.3 billion pounds, while UK
like-for-like sales climbed 1.2%, having risen 0.5% in the first
quarter.
Recent industry data has shown Tesco outperforming its main
rivals - Sainsbury's, Asda and Morrisons.
Analysts say Tesco is benefiting from its huge online
business, its strategy to match prices at German-owned
discounter Aldi on around 650 lines and the success of its
'Clubcard Prices' loyalty scheme.
However, Tesco chairman John Allan told ITV last month that
supply chain disruption meant food prices in Britain could rise
by 5% this winter.
Tesco's share price has climbed about 14.6% 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 61%, while Sainsbury's,
also buoyed by takeover speculation, is up 33.5%.
Tesco is 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 and Mark Potter)