Tesco profits down 24% as rival Sainsbury's edges ahead

Tesco: expects a stronger second half-year performance
Tesco: expects a stronger second half-year performance

Tesco has seen a sharp drop in its group pre-tax profits of 23.5% to £1,387m in the first half of the year, while rival Sainsbury's has enjoyed a like-for-like sales growth.

The supermarket's group pre-tax profits fell by nearly a quarter in the 28 weeks to 26 August, due to "significantly reduced profits from property related items".

The supermarket’s UK sales remained flat in the second quarter, leading to an overall 0.5% drop in like-for-like sales in the first half of the year.

Long-term rival Sainsbury’s however, has reported a second quarter like-for-like sales jump of 2.1% and a total sales growth of 4.4% for the first half of the year.

Sainsbury’s praised its online and convenience business alongside the strong performance of its own brand food range and its clothing brand, Tu, for its good performance.

Philip Clarke, Tesco's chief executive, claimed its UK performance had strengthened throughout the first half-year of trading, particularly in its food business, as it continues to focus on becoming a multi-channel retailer.

He said: "The challenging retail environment in Europe has continued to affect the performance and profitability of our businesses there.

"The investments we have made to improve our offer for customers in the region are already starting to take effect and we expect a stronger second half as a result."

Tesco today also announced a joint venture with China Resources Enterprise, giving Tesco a 20% stake in China’s leading food retailer.

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