Retail Gloom Set to be Defied by Tesco With Increase in Profits

Tesco, the biggest retailer in Britain, is anticipated to defy the gloom that is afflicting the high street on Wednesday as it is expected to report an increase in profits and disclose more detail regarding its plans for Booker, its recently acquired wholesale giant.

Some analysts estimate that the supermarket chain will report a pre-tax profit (excluding one-off costs) amounting to approximately £1.2bn, an increase of 60 percent on last year and its first 10-figure profit on that basis ever since the accounting scandal that emerged four years ago.

The increase in profits is likely to be considered as a success for Dave Lewis, the chief executive of Tesco who has led a massive overhaul of the business, selling off overseas divisions, removing thousands of management jobs and cutting prices in an attempt to improve its fortunes. However, the figures are still anticipated to be significantly lower compared to the 2013-2014 peak of Tesco, when it drummed up underlying pre-tax profits amounting to £3bn.

The controversial £3.7bn swoop of Tesco on Booker that was completed last March and the retailer are assumed to give the investors a first glimpse of how the company’s efforts to combine the two businesses are going.

In a note, analysts at Credit Suisse said that the takeover could become a “defining moment” for the retail giant, which will offer it more flexibility over how it uses its giant estate of stores. However, they warned that the merger would become “challenging, with different customers, buyers, and assets to manage.”

Darren Shirley of Shore Capital said that Tesco, along with Asda, Morrisons, and Sainsbury’s had been “asleep at the wheel” in the run-up to 2014, enabling discounters Lidl and Aldi to quickly seize a huge chunk of the market.