Preliminary Results 2016/17


On a continuing operations basis

  Change at
constant rates

Change at actual rates
Headline measures1:          
Group sales2 £49.9bn £47.9bn   1.1% 4.3%
Group operating profit before exceptional items3 £1,280m £985m   24.9% 29.9%
Diluted EPS pre-exceptionals & IAS19 finance costs 7.90p 5.61p   n/a 40.8%
Retail operating cash flow4 £2,279m £2,088m   n/a 9.1%
Net debt4,5 £(3,729)m  £(5,110)m   n/a down 27.0%
Statutory measures:
£55.9bn £53.9bn   0.8% 3.7%
Operating profit £1,017m £1,072m   (11.8)% (5.1)%
Profit before tax £145m £202m   (39.1)% (28.2)%
Diluted EPS 0.81p 3.22p   n/a (74.8)%

Growth in sales2, volume, profit3 and cash4

  • Group sales2 up 4.3% to £49.9bn
  • UK like-for-like sales6 up 0.9% - first reported full-year growth since 2009/10; UK food LFL up 1.3%
  • Positive volume growth in both UK & ROI and International
  • Group operating profit before exceptional items3 up 30% to £1,280m; UK & ROI up 60% to £803m
  • Step up in Group operating margin3 from 1.8% to 2.3%; on track for 3.5-4.0% ambition by 2019/20
  • Retail operating cash flow4 up 9% to £2.3bn
  • Net debt4,5 of £(3.7)bn, down 27%; £1.9bn of debt repaid within the year
  • Statutory revenue up 3.7% to £55.9bn; PBT down year-on-year after £(235)m exceptional charge booked post year-end following our agreement with SFO and FCA7

Six strategic drivers guiding our actions

  • Brand health8 at strongest level in five years
    • Further improvement in core offer, including c.£300m investment in seven exclusive fresh food brands in March 2016, contributing to sustained market outperformance in fresh food
    • Price of typical basket down 6% since Sept 2014; promotional participation down to 32%
    • Most improved food retailer for quality perception; record rating for staff helpfulness at 80%
    • Availability at record high; simpler range with 24% net reduction over two years
  • Cost savings of £226m already achieved towards £1.5bn medium-term target; FY savings of £455m
  • Generated £2.3bn retail operating cash; £0.4bn underlying working capital9 inflow
  • More efficient mix across channels & products; improved service model in 1,500 stores
  • Released £0.5bn value10 from property; 1.0m sq. ft. space re-purposed; 16 stores re-purchased
  • Innovated to remove 14bn calories from soft drinks in two years; food donations up 148% as FareShare FoodCloud now in all large UK stores; PayQwiq digital wallet used once every 5 seconds

Dave Lewis, Chief Executive:

“Today, our prices are lower, our range is simpler and our service and availability have never been better.  Our exclusive fresh food brands have strengthened our value proposition and our food quality perception is at its highest level for five years.  At the same time, we have increased profits, generated more cash and significantly reduced debt.

We are ahead of where we expected to be at this stage, having made good progress on all six of the strategic drivers we shared in October.  We are confident that we can build on this strong performance in the year ahead, making further progress towards our medium-term ambitions.

On top of this, our proposed merger with Booker will bring together two complementary businesses, driving additional value for shareholders by realising substantial synergies and enabling us to access the faster growing ‘out of home’ food market.”

Like-for-like sales performance6

UK & ROI 0.3% 0.9% 1.7% 0.6% 0.6% 1.3%   0.9%
 UK 0.3% 0.9% 1.8% 0.7% 0.6% 1.2%   0.9%
 ROI 0.3% 0.1% 0.5% (1.3)% 0.2% (0.4)%   (0.1)%
International 3.0% 2.1% 0.6% (0.3)% 2.6% 0.1%   1.3%
 Europe 2.8% 1.3% 0.7% (0.8)% 2.0% (0.1)%   0.9%
 Asia 3.3% 3.0% 0.4% 0.5% 3.2% 0.4%   1.8%
Group 0.9% 1.1% 1.5% 0.4% 1.0% 1.0%   1.0%

Headline Group results

A full Group income statement can be found on page 13 of this statement.

52 weeks ended 25 February 2017
On a continuing operations basis

  Year-on-year change
exchange rates)
  Year-on-year change
exchange rates)
Group sales (exc. VAT, exc. fuel)2 £49,867m   £47,859m   1.1%   4.3%
Fuel £6,050m   £6,074m   (1.0)%   (0.4)%
Revenue (exc. VAT, inc. fuel) £55,917m   £53,933m   0.8%   3.7%
Group operating profit before exceptional items3 £1,280m   £985m   24.9%   29.9%
- UK & ROI11 £803m   £503m   57.7%   59.6%
- International £320m   £320m   (12.5)%   0.0%
- Tesco Bank £157m   £162m   (3.1)%   (3.1)%
Include exceptional items £(263)m
Group statutory operating profit/(loss) £1,017m   £1,072m   (11.8)%   (5.1)%
Group profit before tax before exceptional items and net pension finance costs £842m   £490m       71.8%
Group statutory profit before tax £145m   £202m       (28.2)%
Diluted EPS before exceptional items 6.75p   4.05p        
Diluted EPS before exceptional items and net pension finance costs 7.90p   5.61p        
Diluted EPS 0.81p   3.22p        
Basic EPS 0.81p   3.24p        
Capex12 £1.2bn   £1.0bn        
Net debt4,5 £(3.7)bn   £(5.1)bn        
Cash generated from retail operations4 £2.3bn   £2.1bn        

A detailed analysis of discontinued operations can be found in Note 7 on page 32.


  1. The Group has defined and outlined the purpose of its alternative performance measures, including its headline measures, in the Glossary on page 52.
  2. Group sales exclude VAT and fuel. Sales growth shown on a comparable days basis.
  3. Excludes exceptional items by virtue of their size and nature in order to reflect management’s view of the performance of the Group.
  4. Net debt and retail operating cash flow exclude the impact of Tesco Bank, in order to provide further analysis of the retail cash flow statement.
  5. Net debt includes both continuing and discontinued operations.
  6. Like-for-like is a measure of growth in Group online sales and sales from stores that have been open for at least a year at constant foreign exchange rates.
  7. SFO and FCA are acronyms for the Serious Fraud Office and the Financial Conduct Authority respectively.
  8. As per YouGov BrandIndex, February 2017.
  9. Working capital excluding the impact of exceptional items.
  10. Value released from property relates to gross proceeds from property disposals in the year.
  11. The elimination of intercompany transactions between continuing operations and the discontinued Turkey operation, as required by IFRS 5 and IFRS 10, has resulted in a reduction to the prior period UK & ROI operating profit of £(2)m.
  12. Capex is shown excluding property buybacks.

Creating value for our key stakeholders

Guided by the six strategic drivers we shared in October 2016, we have made strong progress this year with our focus on creating long-term, sustainable value for our key stakeholders.


  • introduced seven new, exclusive fresh food brands, investing c.£300m, further removing reasons for customers to shop elsewhere; these brands now feature in 64% of customers’ baskets
  • simpler, clearer and lower prices; multi-buy promotions reduced by a further 24% year-on-year; typical customer basket 6% cheaper than in September 2014
  • simpler product range with 24% net range reduction and 4,400 new products over two years
  • improvements across all key customer metrics; record sales-based availability of 96%, continue to be rated first by customers for speed of service and score for staff helpfulness up to 80%
  • product and packaging innovation helping customers reduce waste, e.g. new, individual-portion chicken packaging and new frozen fruit ranges


  • 83% of all colleagues recommend us as a ‘great place to work’, up from 81% last year
  • significant improvement in colleagues recommending us as a ‘great place to shop’ vs last year (+7 NPS)
  • more opportunities, with 4,000 colleague promotions; plan for 2,500 apprenticeships this year
  • two-thirds of colleagues believe their job has become simpler year-on-year
  • moved replenishment from nights to days in 195 stores, increasing number of colleagues available to help customers at peak times
  • first UK colleague health month in January 2017 including 1.8m pieces of free fruit provided

Supplier partners

  • Supplier Viewpoint measure improved from 70% to 77% this year (UK: from 68% to 78%)
  • ranked as top overall retailer by the independently-run Advantage Report Mirror supplier survey
  • Supplier Network re-launched and now has 5,000 members; 94% rate network as beneficial
  • launched food waste hotline in March 2017 to quickly address potential waste in supply chain
  • 99.5% of small suppliers and 93% of largest suppliers moved to standardised payment terms; all to move by end-August 2017


  • in October 2016, shared ambition to deliver Group operating margin of 3.5-4.0% by 2019/20, underpinned by six strategic drivers including £1.5bn cost savings
  • generated £2.3bn retail operating cash flow, including underlying working capital inflow of £0.4bn
  • regained full ownership of another 16 UK stores, in line with aim to reduce exposure to fixed-uplift or inflation-linked rental agreements; further seven large stores re-purchased in April 2017
  • completed sale of our business in Turkey, avoiding incremental cash investment
  • proposed merger with Booker to enable access to larger, faster-growing market opportunity
  • intention to resume dividend payments in respect of the 2017/18 financial year; expected to grow progressively, with aim of achieving target cover of around two times EPS over the medium-term

Looking ahead

We made good progress over the last year, further strengthening our customer offer and delivering an improvement in profitability a little ahead of expectations.

We are confident in the plans we have shared and in the progress we will make this year, including further steps towards reducing our costs by £1.5bn, generating £9bn retail cash from operations and improving Group operating margin to between 3.5% and 4.0% by 2019/20.  With a much more competitive offer and supplier partnerships as strong as they have ever been, we are much better positioned to navigate challenging market conditions.

In January, we announced that we had agreed the terms of a proposed merger with Booker, focused on unlocking new growth, particularly in the faster-growing ‘out of home’ food market.  We are continuing to engage as planned with the Competition and Markets Authority in advance of seeking shareholder approval for the transaction, anticipated in late 2017/early 2018.


Investor Relations: Chris Griffith 01707 912 900
Media: Ed Young 01707 918 701
  Philip Gawith, Teneo Blue Rubicon 0207 420 3143

This document is available at

A meeting for investors and analysts will be held today at 9.00am at London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS.  Access will be by invitation only.  For those unable to attend, there will be a live webcast available on our website at  This will include all Q&A and will also be available for playback after the event.  All presentation materials, including a transcript, will be made available on our website.

A video featuring Dave Lewis, Chief Executive, Jason Tarry, Chief Product Officer and Alessandra Bellini, Chief Customer Officer, discussing the Preliminary Results and our fresh food offer is available now to download in video, audio and transcript form at


This document may contain forward-looking statements that may or may not prove accurate.  For example, statements regarding expected revenue growth and operating margins, market trends and our product pipeline are forward-looking statements.  Phrases such as "aim", "plan", "intend", "anticipate", "well-placed", "believe", "estimate", "expect", "target", "consider" and similar expressions are generally intended to identify forward-looking statements.  Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. Any forward-looking statement is based on information available to Tesco as of the date of the statement. All written or oral forward-looking statements attributable to Tesco are qualified by this caution.  Tesco does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances.

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