UK Inflation Falls; Tesco Earnings

123jump.com Staff
21 Apr, 2009
New York City

UK consumer prices in March rise at a slower pace at 2.9% and retail price index declined in the month for the first time in five decades. The rising unemployment and fall in energy prices led to the decline in price increase growth rate. Tesco reported 15% increase in sales.

[R]1:00PM New York, 6:00PM London- U.K. consumer prices index drops 2.9% in March. Tesco’s group sales increase 15.1% to £59.4 billion.[/R]

U.K stocks fell 0.1% after the latest data on inflation showed a weak price gain on a fall in energy prices and weak demand from consumers. Rising unemployment level dragged the price increase in March to 2.9% from the year ago month. The prices increased in February at 3.2% annual rate.

The Office of National Statistics reported that the retail price index, which gauges housing costs and is integral in wage negotiations, has turned negative for the first time since 1960. The index declined at annual rate of 0.4%, its first decline in five decades.

In London trading FTSE 100 index declined 0.1% or 3.4 to 3,987.46.

Of the FTSE 100 index stocks, 61 gained, 40 dropped, and one was unchanged. Eurasian Natural led gainers in the index shares with a rise of 8.3% followed by Associated British Foods advancing 4.9%.

CPI Falls to 2.9% in March

Office of National Statistics reported today that the country’s consumer price index eased to 2.9% in March from 3.2% the previous month, while the all items retail prices index dropped by 0.4% in the review period.

The all items RPI excluding mortgage interest payments index (RPIX) declined to 2.2% in March from 2.5% the previous month.

The ONS noted that the largest downward contribution to the change in the CPI annual rate were from fall in housing and household services and from gas bills.

There was a large downward contribution from liquid fuels where the price of heating oil fell.

In addition, the index was weighed by food and non-alcoholic beverages, but the largest effect came from vegetables where prices fell more than they declined a year ago. A further downward contribution was from transport costs on falling air fares and the price of fuels and lubricants.

The average price of petrol rose by 0.9 pence per litre in March from February, but diesel prices fell by 0.5 pence per litre this year compared with a rise of 3.8 pence last year.

Tesco Group Sales Soar 15.1%

Tesco reported today that group sales in the 53 weeks ended February 28 increased to 15.1% to £59.4 billion from a year ago, while underlying profit before tax advanced 10%.

For the six weeks from the end of February increased at 3.4% on same store basis and rose 12% across all stores. Sales in the first six week increased 9.2% including petrol sales.

The company plans to add 8 million square feet of new retail space with 75% addition outside the UK.

Total sales in the new financial year increased 9.2% in the first six weeks and 12% excluding petrol. UK like-for-like sales, excluding petrol, advanced 3.4% in the first six weeks.

Total international sales increased at 30.6% to £17.9 billion and rose at 13.6% from a year ago on a constant currency basis.

In Asia, sales grew 29.4% to £7.6 billion, while in Europe sales gained 29.1% to £10.1 billion. In addition, in the U.K. sales advanced 9.5% to £41.5 billion, including like-for-like sales of 4.3% and 2.7% growth from net new sales.

Sales at Fresh & Easy, the retail convenience chain opened sixteen months ago in the Western states in the U.S. were £208 million and losses increased to £142 million from £62 million a year ago.

For the year, sales at UK based stores increased 9.5% to £41.5 billion and same store sales growth increased at 4.3%. Excluding petrol, same store sales increased at 3%. Tesco lured the customers with lower prices and offering ‘Discounter’ range of store branded products as customers looked for cheaper alternatives. Trading profit in the UK increased 12.7% to £2.38 billion.

Net debt at the company at the end of the year surged to £9.6 billion, higher than the company target of £8 billion.

Diluted earnings per share increased 1.5% on 52-weeks basis or 2.6% on 53-weeks basis to 27.31 pence. Group profit before tax increased to 3.13 billion pounds, an increase of 10% on 53-week basis from a year ago or 8.8% on 52-week basis from a year ago.

Gainers & Losers

Eurasian Natural led advancers in the FTSE 100 index shares with a rise of 8.3% followed by gains in Associated British Foods of 4.9%, in Tesco Plc of 4.9%, in Thomas Group of 3.4%, and Admiral Group of 2.7%.

Tesco gained 4.9% or 16.2 pence to 348.3 pence.

Thomas Cook gained after crude oil prices dropped 9.7% to $45.9 per barrel.

Lloyds Banking led decliners in the FTSE 100 index shares with a fall of 9.1% followed by losses in Aviva Plc of 7.5%, in Royal Bank of Scotland of 5.9%, in Old Mutual of 5.5%, and Barclays Plc of 4.8%.

Europe Markets Review

In London FTSE 100 Index closed lower 3.40 or 0.09% to 3,987.46, in Paris CAC 40 Index increased 4.54 or 0.15% to close at 2,973.94 and in Frankfurt DAX index higher 15.33 or 0.34% to close at 4,501.63. In Zurich trading SMI increased 11.54 or 0.23% to close at 5,076.72.