Tesco profits tower over grocery market

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Supermarket giant Tesco has revealed it achieved underlying profits of £2.54 billion in its 2006/07 financial year.

The dominant force in Britain's grocery market achieved underlying profit growth of 13.2 per cent in the 52 weeks to February 24th.

Its core UK sales grew by nine per cent while Tesco.com, which allows customers to shop online and have their groceries delivered to their front door, saw its profitability increase by 48.5 per cent.

Tesco chief executive Terry Leahy, who was yesterday chosen as the most influential unelected person in Britain by a Guardian newspaper panel of journalists, unionists and businessmen, said his company was "investing for the future and delivering today".

"These results demonstrate that we have again made good progress across the group, while making significant start-up investment in new businesses and coping well with challenging conditions in some markets," he said.

"We are pleased with the early performance from Tesco Direct [its non-food division] and our plans to open stores in the US later this year are on track."

Tesco hopes to create 25,000 jobs across the world in the next year and claims to be making "long-term commitments on community and environment issues".

But its business success has attracted significant criticism from some grocery market stakeholders, who claim its dominance in the UK sector is undermining customer choice.

Tesco, along with the rest of the grocery market, is currently being investigated by the Competition Commission (CC) which is concerned that supermarkets' hold over spenders' purchasing power could be hurting the consumer.

With nearly a third of the entire market controlled by Tesco alone, some argue that supermarkets' nationwide cost-efficiency drives are pricing out local providers – to the detriment of customer choice.

Tesco's submission to the CC, published earlier this month, argued that a shift towards smaller stores and the resurgence of competitors including Marks & Spencer, Sainsbury and Morrisons meant competition within the grocery market remains "intense".

"Customers will continue to enjoy the huge consumer benefits that the market is producing," the submission concluded.

Shares in Tesco rose by over two per cent on early morning trading.

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