Tesco Annual Profit Gains 9.1% on Promotions, Korea Acquisition

April 20 (Bloomberg) -- Tesco Plc, Britain’s largest retailer, said annual profit rose 9.1 percent as sales increased in the U.K. and at the Homeplus unit in Korea.

Net income climbed to 2.33 billion pounds ($3.56 billion) in the year ended Feb. 27, from 2.13 billion pounds a year earlier, the Cheshunt, England-based grocer said in a statement today. That matched the 2.3 billion-pound median estimate of 12 analysts surveyed by Bloomberg. So-called trading profit, the earnings measure preferred by most analysts, rose 12 percent.

Tesco doubled rewards on the Clubcard loyalty program and cut prices on its ‘Finest’ food range to lure shoppers as food price inflation slowed. The retailer’s U.K. market share rose to 30.3 percent in the three months through March 21, according to Kantar Worldpanel data. Revenue at Homeplus grew 33 percent, making Korea one of its best-performing international markets.

The results “reflect a combination of resilient underlying sales and good cost control,” Sam Hart, an analyst at Charles Stanley & Co., said in a report before the release. “Tesco’s long-term growth prospects are the best in the U.K. food retail sector, given potential in overseas markets and retailing services.” Hart has an “accumulate” rating on the shares.

Net debt was reduced to 7.9 billion pounds from 9.6 billion pounds a year earlier after the retailer sold property assets and reduced inventory by stocking less food in its backroom storage. Tesco said it expects to cut borrowings to 7.5 billion pounds by the end of the new financial year.

The grocer will pay a final dividend of 9.16 pence a share, increasing the total for the year by 9.1 percent to 13.05 pence.

Tesco stock has climbed 2.2 percent this year, compared with J Sainsbury Plc’s 6.6 percent increase and Carrefour SA’s 13 percent gain.

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.