Tesco heads for profit of £3bn despite growth dip

The UK's biggest supermarket saw like-for-like sales in Britain up 2.5%, about half what J Sainsbury managed and far below what Wm Morrison will report next week.

But Tesco, led by Sir Terry Leahy, still enjoyed record sales in the seven weeks to 10 January and is set to top last year's annual profits of £2.85 billion when it reports in April. Tesco shares gained 6.3p to 356.6p today.

In common with other supermarkets, Tesco expects to create jobs this year— perhaps up to 10,000.

Legal affairs director Lucy Neville-Rolfe said: "We had a good Christmas, especially given the challenging ­economic environment. Not many retailers will be delivering an 11.6% rise in sales across the group."

Fresh & Easy, Tesco's US venture, is "coping well with a severe downturn" in California, the company said.

Like-for-like growth is "strongly ­double-digit" for the 28 stores open more than a year. The City would like more detail on Fresh & Easy's performance, however.

The European arm was up 24%, while Asia soared 43%, taking total inter­national sales up 33%.

Jonathan Jackson, head of equities at stockbroker Killik, said: "We are encouraged by this announcement which highlights many of the reasons why we remain positive on the shares. Although the trading performance is lagging its rivals in the short term, this fails to take into account the long-term attractions of the business."

Analysts say Tesco — notoriously tough on its suppliers — might have to adopt a slightly gentler approach this year as good companies go bust in the face of severe recession.

Tesco says falling commodities prices and lower inflation should ease the pressure felt by suppliers, allowing it to keep food prices down.

Traidcraft, the fair trade organisation, today said that of all retailers Tesco is particularly guilty of bullying farmers into cutting prices by more than they can afford.

It wants a watchdog to be appointed to monitor and penalise supermarkets which treat suppliers unfairly. Traidcraft says polls show that eight in 10 shoppers back this move.

Fiona Gooch of Traidcraft said: "With the vast majority of shoppers wanting an ombudsman to curb supermarkets which exploit their power by intimidating suppliers, supermarkets ignore this message at their peril."

Last week J Sainsbury said it would create 4000 jobs -- they are unlikely to pay as well as the jobs lost from the rest of the economy, however.

Tesco's numbers come as a survey shows retailers suffered their worst December on record, with sales down 3.3% on 2007.

Stephen Robertson, director-general of the British Retail Consortium, said: "These are truly dreadful numbers. Overall, the food sector was almost the only one to show growth. Non-food retailers had a torrid December despite a blizzard of promotions. Many hard-pressed customers couldn't be seduced into spending."