Tesco (LON:TSCO) issued a positive set of full-year preliminary results. Group operating profit jumped by 34% to £2.21 billion, topping the forecast of £2.07 billion, and group sales increased by 11.5% to £56.9 billion. Full-year operating margin came in at 3.45%, and second-half operating margin excluding Booker was 3.79%, so it is clear the company performed better in the latter half. The supermarket is performing well, but some of the metrics didn’t quite measure up to forecasts, as fourth-quarter like-for-like UK sales ticked up by 1.7%, while equity analysts were anticipating 1.8%. The net debt position edged by 9%, but that was in relation to the acquisition of Booker. Tesco have persevered with a tough turnaround plan, and now the firm has either met or is close to achieving the majority of it targets.
Tesco had a strong start to the second-half as the supermarket said UK Christmas sales rose by 2.2%, and like-for-like (LFL) sales in the UK and Ireland including Booker Group increased by 1.9%. British and Irish Christmas LFL sales increased by 2.6%, both in terms of volume and value – which was impressive as it suggests the group didn’t resort to discounting to draw in customers. Low single digit sales growth may not be much, but it put the firm well ahead of the other ‘big four’. Adding to the respectable numbers, Tesco declared it is ‘confident’ in its outlook, and that it is ‘bang on track to deliver’ their plans. It is obvious that Dave Lewis’ turnaround plan is paying off.
ASOS (LON:ASOS) announced an 87% fall in first-half pre-tax profit, and the ‘large scale transformational projects’ were cited for the decline in earnings. The group’s heavy expansion in Continental Europe and the US was the reason for the swing from a net cash position of £37.7 million to a net debt position of £37.9 million Total sales increased by 14%, and the UK operation posted a 16% rise in revenue, while international sales rose by 12%. The online fashion house acknowledged that the first-half performance was ‘disappointing’ while the group is ‘confident of an improved performance in the second-half’. Gross margin dropped by 60 basis points in the six month period on account of discounting, but that was already known to the market. On the bright side, the group retained its guidance for 2019.
ASOS delivered a profit warnings in December. The group said that sales from September to November jumped by 14%, but there was a ‘significant deterioration’ in November. The company previously predicted full-year sales growth of 20-25%, and then it lowered it to just 15%. Profit margins have been revised down to 2% from 4%. Nick Beighton, the CEO, warned that the sector was experiencing ‘unprecedented levels of discounting’. Online companies have a major cost advantage over high street retailers, and it is worrying when they are concerned about consumer spending.
In January, ASOS said the US operation held the group back. Total retail sales for the second-quarter increased by 11%, but the US division registered a 3% drop, while the UK business saw a 14% rise. ASOS confirmed the US unit’s performance was behind their plans, and that did the damage to investor confidence.
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