Tesco's £2.5bn profits follow years of IT innovation

Tesco’s record £2.5bn profits mask an even higher profit margin for its rapidly growing online business, with the retailer grabbing two-thirds of the developing internet market.

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Tesco’s record £2.5bn profits mask an even higher profit margin for its rapidly growing online business, with the retailer grabbing two-thirds of the developing internet market.

The retail giant saw its overall profits rise 13.2% in the year to 24 February, with revenues up 10.9% to £42.6bn. The figures follow continued expansion by the retailer, which has a background of IT innovation, pioneering the development and use of a “Tesco in a box” suite of operating systems that can be rolled out in new stores anywhere in the world.

But sales through the Tesco.com website rose nearly three times as much, up 29.2% on last year, with profits up by a huge 48.5%. Tesco.com sales still generate a relatively small part of the retailer’s total revenues, but this year they sailed past the £1bn mark, to £1.226bn. Profits were £83.4m.

Figures released in August by internet analyst comScore Networks revealed that Tesco.com had captured two-thirds of all online grocery orders, amounting to an average 30,000 orders a day – or total sales of around £2.5m a day. The Tesco website received four times more orders than its closest rival, Asda.com.

In an announcement posted with its results, Tesco said it now had more than 850,000 regular online grocery customers, making 250,000 orders a week.

The retailer has also completed the launch of its non-food Tesco Direct website. The service has been expanded from a “low key” start, with a catalogue of 8,000 items, to 11,000 items now available on its website,. The company plans to make the non-food business “more accessible” through the main Tesco.com portal.

Chief executive Terry Leahy said: “Tesco is investing for the future and delivering today. These results demonstrate that we have again made good progress across the group, whilst making significant start up investment in new businesses and coping well with challenging conditions in some markets. We are pleased with the early performance of Tesco Direct and our plans to open stores in the United States later this year are on track.”

Tesco’s preparations for its flagship US launch have included updating and extending its bespoke Continuous Replenishment supply chain management system so it can be rolled out in the retailer’s California datacentre.

The application update is also being rolled out to datacentres worldwide to provide a platform for Tesco’s continuing international expansion – part of the retailer’s strategy of using a common operating model across its businesses worldwide.

The results announcement said the company had “delivered a strong performance” in Asia, where it intends to implement its “Tesco in a box” operating systems package to underpin the opening of up to 35 new stores in Japan this year.

In the UK, Tesco said its implementation of new checkout technology had improved monitoring and management of customer’s checkout experience. On-shelf availability, measured through the in-store picking of Tesco.com orders, had also improved, the company said.

Related article Tesco selects Micro Focus to ready supply chain for US launch

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