Tesco Annual Profit Fell Despite Sales Boost, Expects Fiscal Year 2022 Improvement -- Update

--Tesco made a lower pretax profit for fiscal 2021 and missed market forecasts for adjusted pretax profit

--Revenue fell but like-for-like sales climbed 6.3% with strong U.K. growth

--The grocer expects improved profitability in fiscal 2022 on lower pandemic costs

By Matteo Castia

Tesco PLC reported Wednesday a fall in pretax profit for fiscal 2021 as the coronavirus pandemic boosted costs, and said it expects improved profitability in fiscal 2022 on lower spending.

The British grocer made a pretax profit of 825 million pounds ($1.13 billion) for the year ended Feb. 27, compared with GBP1.32 billion in fiscal 2020.

On an adjusted basis, pretax profit fell to GBP904 million from GBP1.55 billion in the previous year, missing market forecasts which anticipated a figure of GBP1.17 billion.

Revenue from continuing operations fell to GBP57.9 billion from GBP58.09 billion a year earlier. Meanwhile, administrative expenses and exceptional costs increased.

Like-for-like sales in the period increased 6.3% on the year, including a 7.7% jump in the core U.K. market.

Tesco said it continues to gain market share in the U.K., partly thanks to its Aldi Price Match initiative, which aims to match the prices of items sold by the German discounter and has now been extended to over 500 products.

The board declared a final dividend of 5.95 pence, taking the full-year payout to 9.15 pence, flat on the year.

The company said it expects lower sales but improved profitability in fiscal 2022 as the pandemic winds down and the associated restrictions ease.

"Whilst we expect some of the additional sales volumes we have gained this year in our core U.K. market to fall away as Covid-19 restrictions ease, we expect a strong recovery in profitability and retail free cash flow as the majority of the additional costs incurred as a result of the pandemic in fiscal 2021 will not be repeated," the company said.

The grocer said it expects its bank division to return to profitability in fiscal 2022, after posting an adjusted operating loss of GBP175 million in fiscal 2021.

Tesco also said it has appointed Thierry Garnier as a nonexecutive director with effect from April 30. Mr. Garnier currently serves as CEO at home-improvement retailer Kingfisher PLC. The grocer appointed Bertrand Bodson as a nonexecutive director too, with effect from June 1.

Write to Matteo Castia at matteo.castia@dowjones.com

(END) Dow Jones Newswires

April 14, 2021 03:04 ET (07:04 GMT)

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