BusinessCompany NewsBusiness Week: Tesco checks out a profit.

Business Week: Tesco checks out a profit.

If Tesco lives up to City expectations, it should be delivering a pre-tax profit of £1.2bn when it announces its full-year results this week.

Last month the supermarket group issued a trading statement saying its management remained confident its results would be ‘broadly in line’ with expectations. Back in September last year Tesco reported half-year sales of £11.5bn, up 14% on the same period in 2000.

Its online service tesco.com, regarded as one of the few dotcom success stories, had achieved sales of £146m in the first six months, but overall made a loss of £3m, in part due to launch costs of new sites such as its wine warehouse.

Tesco proudly claims it is the largest online supermarket in the world and now operators in other markets such as the US are copying its model.

CIMA-trained finance director Andrew Higginson, along with chief executive Terry Leahy and chairman John Gardiner should be feeling comfortable when he presents the group’s results on 9 April.

But he lives in an extremely competitive environment, which is why he has just authorised a £100m refurbishment programme, following in the footsteps of competitors Sainsbury’s and Safeway.

This comes at the same time as a massive cut in prices, which could cost the retailer £70m.

At the time, Tesco said 15,000 prices were now cheaper than they were in January last year, contributing to a year of overall deflation in its stores.

This followed earlier cuts which the group claimed had totalled £200m.

And it is not just looking at its UK supermarket operations to produce profit.

Last September the group announced its personal finance operation had made a healthy #14m profit, though half of the profit went to its financial partners such as Royal Bank of Scotland and Norwich Union.

It is also focussing on it overseas markets, which its anticipates will account for 45% of its sales space by the end of the year.

And it is taking on the online retailers in the US, linking up with 1,500 Safeway Inc stores to reach a potential 130,000 new customers.

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