Terry Leahy bullish on consumer spending as Tesco hits £1.6bn

11 April 2012

Tesco chief executive Sir Terry Leahy gave a surprisingly upbeat view of consumer spending today and said the supermarket giant's bank would launch mortgages and current accounts next year.

He declared: "The recovery is set in place and despite some concerns about public sector spending cuts there is a strong global recovery which will underpin Britain's steady underlying growth."

His positive take came as Tesco reported a 12.5% rise in profits to £1.6 billion, or the equivalent of £8.8 million of profit a day in the half year to end-August. Sales were up 8.3% to £32.9 billion.

In the UK, sales at stores which have been open for at least a year increased 0.4% in the second quarter, a considerable improvement on the 0.1% jump in the first three months.

Leahy admitted: "We would have done even better if it had not been for the huge rise in petrol prices. At their peak they were up by 25% on a year before, which took an extra £20 a month out of families' budgets."

Outside the UK Leahy said Tesco was experiencing "the tailwinds of recovery in most of our markets. Our important Asian markets in particular are emerging strongly from recession."

Asian trading profits grew by 30% to £228 million. Continental Europe's rose 11% to £212 million. But the UK still provided the vast bulk, up 5.5% to £1.2 billion.

Tesco also set a new target for its US venture Fresh & Easy to become profitable in 2012-13. When it was set up in 2008 it had hoped for profits this financial year but the business was, according to Leahy, based in one of the areas worst hit by the US subprime crisis.

He admitted 13 new stores would be mothballed in three states because the scale of customer growth had failed to meet expectations. In the past six months trading losses were cut by 12% to £95 million and he said the chain was "popular, growing and increasing the number of outlets".