Tesco met forecasts with a 10 per cent rise in first-half profit, signalling it can cope with weak markets even as it called for interest rate cuts and steps to steady banks.
Shares in the supermarket group, which serves more than 20 million British and Irish shoppers a week, jumped as much as 5.4 per cent in early trading today after it reported a slight acceleration in second-quarter UK underlying sales.
Tesco chief executive Terry Leahy said shoppers were "hard pressed", but that some analysts were exaggerating by saying retail conditions were the worst for 30 years.
"Inflation has passed its peak ... and that will leave room for interest rate cuts which I think will be welcomed," he said in a telephone interview.
"Also, though, it's important that we get banks back to doing their job, which is to provide liquidity for the real economy and lending at sensible prices".
Tesco, the world's third largest retailer behind France's Carrefour and US group Wal-Mart, said profit before tax and one-off items was £1.45 billion (€1.82 billion) in the 26 weeks to August 23rd, on sales up 14 per cent to £25.6 billion.
Tesco, which runs more than 3,700 stores in 13 countries and is the largest retailer in Ireland, said first-half growth was driven by a 27 per cent increase in international sales, helped by a 10 per cent rise in the UK.
As per usual with Tesco, no detailed figures were provided for its Irish division. Tesco Ireland's sales and profit data are included as part of the international business arm.
Tesco plans to open 16 new stores in Ireland by the end of its February 2009 as part of a €150 million expansion.
The interim dividend was raised 11.6 per cent to 3.57 pence.
Analysts on average expected a profit of £1.43 billion and sales of £25.78 billion, according to a Reuters poll.
"The outlook for consumer economies around the world remains highly opaque. However, the company expresses confidence in its ability to thrive in tough conditions - corroborated by these results," Cazenove analysts said in a research note.
At 8.45am, Tesco shares were up 3.2 per cent at 381.7 pence, valuing the group at about £30 billion.
It is on track to create 30,000 jobs this year, it added.
Britain's shoppers are curbing spending amid higher food and fuel costs, sliding house prices and economic uncertainty. Earlier yesterday, the GfK NOP consumer confidence index showed UK shoppers remained gloomy in September.
Tesco's UK like-for-like sales excluding fuel, a key industry measure, rose 4 per cent in the second quarter, up from 3.5 per cent in the first and broadly in line with analysts' forecasts of 4.1 per cent.
Reuters