What happened and why UK Supermarkets have been full-throttle. As you probably noticed from those hours spent wrestling over a tin of beans with a stranger, it has been a lucrative place to be the past six months for supermarkets. Tesco (+3.48%) sales proved you right for the most part, as bumper sales pushed shares 5% higher in early trading on Wednesday, but there is more at play than just busy tills. With things moving at break-neck speed, the UK's biggest supermarket has had to counter bumper demand, with a bump-up in costs. Tesco may have raked in £26.7bn of sales, which is 6.6% higher in the last six months than the same time last year but supermarkets are a diverse beast these days... No pub = Tesco club... The 69% jump in online shopping pushed sales in the UK 8.5% higher, helped by the closure of pubs & restaurants.And Tesco = the UK these days... where 91% of Tesco sales now come from after they agreed to sell both its Asian and Polish operations during the first half. 🦂 Profit sting... Despite the surging sales, Tesco's operating profit actually came in at £1.01bn, which was nearly 5% lower than last year but still ahead of what analysts’ had forecasted. And we knew that already. In response to coronavirus, Tesco had to act swiftly and safely, which doesn't come cheap... Safe & secure... Expected to drop an extra £840 million on salaries and covid-secure stores because of the pandemic.Nice trim... Covid costs actually came in at £63m below the first half guidance and Tesco expect the real figure will be £730m by the time the year is out. The bigger picture... As online sales balloon and accelerate our e-supermarket culture, mega-mart side of supermarkets are grinding to a halt when it comes to growth. Despite the socially-distanced nature of giant supermarkets, sales there only ticked up 1.4%. With a the current lockdown that is sweeping the north of the UK, few are placing firm bets on the annual outcome. 😉 But Tesco are keeping investors happy... the groups attracted widespread criticism after sticking with the company's pledge to pay a £635m final dividend to investors. Many businesses have suspended or cancelled payouts. Amid the coronavirus pandemic, more could have been gained over lining the coffers of pension and investment funds... but easier said than done. With Asda's £6.35bn takeover complete and the Walmart-owned supermarket in the hands of the Issa brothers and TDR Capital, keeping shareholder sweet right now could be key. The new-owners have said they'll invest over £1 billion in the next three years to further strengthen Asda’s business and its supply chain, and grow its convenience and online operations. | The Takeaway 🏠 Tesco staying close to home... New CEO Ken Murphy, took charge of the company a week ago after the retirement of Dave Lewis, and he was clear there were no plans for further expansion or retrenchment... as the UK is tough enough right now. Tesco may have been the beneficiaries of a year-long business rate holiday - worth around £530m to the company - but money is also going out in other directions. Tesco banking lost £155m, bad debts are stacking up and demand for fuel obviously slumped in lockdown. The next few months will feature the challenges of a socially distanced festive season followed closely by the end of the UK’s Brexit transition period. Happy holidays!
