City Talk

Robust first half for Tesco

Tesco reported a whopping 10.3% increase in pre-tax profit to £1.45bn over the six months to 23 August. Analysts were agreeably surprised, as the result was ahead of their forecasts. Sales rose by 14.1% to £28.1bn. Like-for-like sales in the UK (excluding petrol) were up 3.7%. International sales rose by 12.6% at constant exchange rates. Analysts point out that Tesco's profit growth is the weakest first-half growth since 2001.

Food sales were much more robust than non-food sales but Sir Terry Leahy, Tesco's boss, pointed out there "is no use trying to get shoppers to spend more due to food inflation". Tesco has met the challenge by launching a discount range of value brands to compete with German discount stores Aldi and Lidl, to which shoppers are flocking, attracted by bargain-priced goods.

Tesco revealed sales of £76m at its 90-store Fresh & Easy US venture, with trading losses of £60m.

M&S enters price war

Marks & Spencer has entered the price war with supermarkets, to safeguard its food operations. It is finding the necessary cash by cutting back on its investment plans, with capital expenditure for the remainder of the year reduced from £900m to some £700m.

Sales were down 6.1% in the 13 weeks to 27 September, while food sales slumped by 5.9%. On the food front, boss Sir Stuart Rose is introducing more promotions and implementing a range of initiatives to improve value, innovation and availability. M&S has a total of 667 stores catering for 21m customers.

Compass passes on higher prices

Global catering firm Compass, which operates canteens in offices, prisons and schools, cheered the market with a good fourth-quarter trading statement - despite soaring food prices and the economic recession. Compass says its organic growth will be well over 5% in its latest financial year. The caterer, which has dealings in 60 countries, has sales of over £10bn. It countered rising food prices by renegotiating supplier contracts, changing menus, reducing waste and hiking prices.

Organic growth in the North American division is anticipated to rise by 7% over the latest financial year. Mainland European operations should grow by 5% and UK revenues will remain at last year's level. Revenue growth in the rest of the world will be 9% over the year. Only 3% of the firm's revenue comes from investment banks.

Sainsbury's shares up

In roller-coaster markets, J Sainsbury notched up share price gains, as dealers speculated that the Qatari Investment Authority is joining up with another big Sainsbury's shareholder, Robert Tchenguiz, the property specu-lator, to launch a fresh bid.

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