Tesco profits

[blue sky]

I’m not a fan of Tesco. I don’t like their stores, their meal deals or their clubcards. Shirley Porter’s big council house sell-off for votes still rankles.

However they are making about 3p profit on every £1 of sales. That is not a rip-off or profiteering. Prior to the pandemic most supermarket chains made 2-4% profits on revenue before tax and that had been the case for decades.

Selling food is similar to selling fuel for vehicles. It’s an absolute necessity and if your prices are a bit too high then the consumer will shop elsewhere. That’s why margins are so low compared to, say, tech. Apple, for example, makes annual profits of around $170 billion on sales of $380 billion.

[Gofer Blue]

I’m not a fan of Tesco. I don’t like their stores, their meal deals or their clubcards. Shirley Porter’s big council house sell-off for votes still rankles.

However they are making about 3p profit on every £1 of sales. That is not a rip-off or profiteering. Prior to the pandemic most supermarket chains made 2-4% profits on revenue before tax and that had been the case for decades.

Selling food is similar to selling fuel for vehicles. It’s an absolute necessity and if your prices are a bit too high then the consumer will shop elsewhere. That’s why margins are so low compared to, say, tech. Apple, for example, makes annual profits of around $170 billion on sales of $380 billion.

Please explain how an increase in sales of 4.4% can lead to pre-tax profits increasing from £882 million to £68 billion?

[blue sky]

Please explain how an increase in sales of 4.4% can lead to pre-tax profits increasing from £882 million to £68 billion?

The explanation is in the BBC article in the OP. ‘Price pressures’ hit margins. Tesco has contracts with growers and suppliers and would have seen its margins squeezed as food price inflation hit 20% in late 2022/early 2023. These latest figures are a return to normal profitability, as you can see in this link from Tesco itself.

https://www.tescoplc.com/investors/r...e-year-record/

I walk/drive past Tesco to shop at Morrisons. I don’t like Tesco’s links to the Tories or their borderline fraudulent deals, or their data-collecting clubcard. They were pioneers of these manipulation techniques and I can’t abide the company.

But as I wrote yesterday, profiteering is very difficult in the grocery business as there are at least 10 large food retail companies in the UK who mainly compete on prices.

[lardy]

I’m not a fan of Tesco. I don’t like their stores, their meal deals or their clubcards. Shirley Porter’s big council house sell-off for votes still rankles.

However they are making about 3p profit on every £1 of sales. That is not a rip-off or profiteering. Prior to the pandemic most supermarket chains made 2-4% profits on revenue before tax and that had been the case for decades.

Selling food is similar to selling fuel for vehicles. It’s an absolute necessity and if your prices are a bit too high then the consumer will shop elsewhere. That’s why margins are so low compared to, say, tech. Apple, for example, makes annual profits of around $170 billion on sales of $380 billion.

Do they make 3p on every £1?

For example, if they sell £1 of Heinz beans and £1 of Tesco Value beans and £1 of Tesco brand beans, is it the same 3p for each of them?

[blue sky]

Do they make 3p on every £1?

For example, if they sell £1 of Heinz beans and £1 of Tesco Value beans and £1 of Tesco brand beans, is it the same 3p for each of them?

I know that you’re cleverer than this question makes you appear. You are undoubtedly familiar with the term “loss leader”.

Of course, the 3p in the pound doesn’t apply uniformly across all products and sales. Setting prices on individual products is probably mostly handled by algorithms and AI nowadays. We’ve just been through Easter when lamb prices are slashed. Morrisons sold legs for £7 a kilo, I’d imagine that Sainsburys and Tesco did the same. I popped into Leckwith Asda after visiting the CCS on Ash Wednesday and legs of lamb were £5 a kilo so I grabbed a couple and told my family and friends about it, and a few of them made the most of these insanely cheap prices. Asda must have made a loss on this promotion but they got people through the doors and spending.

[lardy]

I know that you’re cleverer than this question makes you appear. You are undoubtedly familiar with the term “loss leader”.

Of course, the 3p in the pound doesn’t apply uniformly across all products and sales. Setting prices on individual products is probably mostly handled by algorithms and AI nowadays. We’ve just been through Easter when lamb prices are slashed. Morrisons sold legs for £7 a kilo, I’d imagine that Sainsburys and Tesco did the same. I popped into Leckwith Asda after visiting the CCS on Ash Wednesday and legs of lamb were £5 a kilo so I grabbed a couple and told my family and friends about it, and a few of them made the most of these insanely cheap prices. Asda must have made a loss on this promotion but they got people through the doors and spending.

I don't know if you needed the little dig at the start of that response. But anyway, I was thinking of an infographic like this one, although I think it's Canadian.

supermarket.jpg

At the end of it, the supermarket makes 3%/3p in the pound. But if the supermarket has a stake in the manufacturer or supplier (vertical integration), or IS the manufacturer and supplier, then they're also making a profit elsewhere along the line.