Tesco PLC on Thursday reported consensus-topping annual revenue growth, but inflationary pressure took a chunk out of its profit.

The company maintained its yearly dividend and once again announced a £750 million share buyback. It said retail profit for the new year will be flat.

Tesco shares shot up 1.5% to 271.30 pence each in London on Thursday morning, among the best FTSE 100 performers.

For the year ended February 25, revenue, excluding VAT but including fuel, rose 7.2% to £65.76 billion from £61.34 billion. The figure topped company-compiled consensus of £65.72 billion.

Tesco reported pretax profit of £1.00 billion, down 51% from £2.03 billion the year prior. Adjusted operating profit fell 6.9% to £2.63 billion from £2.83 billion. It topped company-compiled consensus of £2.61 billion.

Retail adjusted operating profit fell 6.1% to £2.49 billion from £2.65 billion. The figure landed at the top end of its £2.4 billion and £2.5 billion guidance range.

‘Our results reflect our continued investment in delivering great value and quality for our customers, whilst at the same time looking after our colleagues. This is despite unprecedented levels of inflation in the prices we have paid our suppliers for their products, and the cost of running our own operations. I am very proud of the way the Tesco team has responded to these challenges and would like to thank every colleague for the contribution they have made,’ Chief Executive Ken Murphy said.

Tesco said it is ‘proud’ of its annual performance, and has a strategy in place ‘to keep winning’.

The company added: ‘We will continue to prioritise investment in our customer offer whilst doing everything we can to offset the impact of ongoing elevated cost inflation.’

Retail like-for-like sales rose 5.1% during the financial year, with volumes holding up ‘relatively well’ in the face of cost-of-living pressure.

In the UK & Ireland alone, retail like-for-likes rose 4.7%, while in central Europe, they surged 10%.

At Tesco Bank, adjusted operating profit for the year fell 19% to £143 million from £176 million, though revenue increased 20% to £1.11 billion from £922 million. The profit outcome reflected a provision release which boosted its bottom-line in the prior year.

Tesco said it maintained its ‘strong’ UK grocery market share at 27.3%. It is the ‘only full-line grocer to grow share versus pre-pandemic’, it said.

Tesco declared a final dividend of 7.05 pence per share, down 8.4% from 7.70p. Its full-year payout was maintained at 10.90p per share, however.

Once again, it announced it plans £750 million worth of share buybacks over the next 12 months. Ahead of the annual results, analysts at Barclays said Tesco could have the firepower to declare a buyback worth £1 billion, however, but noted the grocer could play it safe and keep it at £750 million.

Looking ahead, Tesco said it expects a ‘broadly flat’ retail adjusted operating profit in the new financial year. It expects retail free cash flow within its £1.4 billion to £1.8 billion target range. At best, this would be a 16% fall from £2.13 billion in financial 2023.

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