Tesco PLC. (OTCPK:TSCDF) | --- | |---------------------------------------------| | | | | | Q2 2023 Earnings Conference Call | | October 05, 2022 4:00 AM ET | | Company Participants | | Ken Murphy - Group Chief Executive | | Imran Nawaz - Chief Financial Officer | | Conference Call Participants | | Andrew Gwynn - BNP Paribas Exane | | Rob Joyce - Goldman Sachs | | James Grzinic - Jefferies | | Clive Black - Shore Capital Markets | | William Woods - Bernstein | | Fabienne Caron - Kepler Cheuvreux | | Xavier L ...

Financial Data and Key Metrics Changes - Group sales grew by 3% year-on-year and by 10.2% over two years, with strong performance across all regions [17] - Group profit increased by 58.9% to £2.8 billion, reflecting strong sales performance and a reduction in COVID-19 costs [18] - Retail free cash flow was £2.3 billion, up £0.9 billion from last year, driven by higher operating profits and the elimination of UK pension contributions [19] - Net debt decreased to £10.5 billion, £1.4 billion lower than last year, primarily due to strong free cash flow generation [20] - Proposed final dividend of 7.70 pence per share, leading to a full-year dividend of 10.9 pence, an increase of 19.1% [20] Business Line Data and Key Metrics Changes - Total retail sales for the year were £53.8 billion, with profit of £2.6 billion, showing strong recovery in both UK and Ireland segments [21] - UK sales grew with like-for-like growth of 0.4%, while Ireland saw a decline due to strong comparatives from the previous year [22] - Booker reported a 15.3% increase in one-year like-for-like sales, driven by a recovery in catering sales [22] - Central Europe experienced a 2.9% increase in like-for-like sales, with growth across all channels and categories [31] Market Data and Key Metrics Changes - Market share in the UK improved consistently, gaining market share every month, with a notable outperformance in volume terms [11][12] - Ireland's market share improved by 11 basis points, while Central Europe also saw market share growth [13] - Online sales in the UK remained significantly larger than pre-pandemic levels, with a two-year like-for-like increase of 66% [25] Company Strategy and Development Direction - The company focuses on maintaining competitive pricing through initiatives like Aldi Price Match and Clubcard prices [51][53] - Strategic priorities include enhancing customer value, expanding digital engagement through Clubcard, and improving convenience in shopping [50][66][70] - The company aims to offset cost inflation and create additional headroom for investment in competitiveness and growth [80][81] Management's Comments on Operating Environment and Future Outlook - The management acknowledges the challenging operating environment due to inflation and cost of living concerns, with a focus on maintaining customer value [83][86] - Profit guidance for the next year is set between £2.4 billion and £2.6 billion, reflecting uncertainties in the market [88] - The company remains committed to sustainable cash generation and shareholder returns through a share buyback program [90] Other Important Information - The company has made significant contributions to humanitarian efforts in response to the war in Ukraine, raising nearly £4 million for the Red Cross [6] - The company has launched ambitious climate commitments, including a target for net zero operations by 2035 [62] Q&A Session Summary Question: Market outlook and inflation impact - Management stated that they start the year in a strong position with the best price indices in years and are committed to maintaining leadership in pricing [98] Question: Price increases and market leadership - Management noted that price inflation is occurring where necessary, with a mixed market on who leads price increases, but Tesco aims to hold back inflation [107] Question: Changes in customer behavior - Management indicated that they are observing changes in customer behavior due to disposable income pressures, but these are expected rather than confirmed [112] Question: Profit guidance details - Management provided insights into uncertainties affecting profit guidance, including COVID normalization and inflation levels [115]

| --- | --- | --- | --- | --- | --- | --- | --- | --- | |--------------------------------------------------------------------------|-------|-------|-------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Tesco Preliminary | | | | | | | | | | | | | | | | | | | | Results 2021/22. | | | | | | | | | | Ken Murphy, Chief Executive Officer Imran Nawaz, Chief Financial Officer | | | | | | | | | | | | | | | | | | | | 13 Ap ...