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Tuesday, September 21, 1999 Published at 10:06 GMT 11:06 UK

Business: The Company File

Tesco surges ahead

Tesco is the UK's largest supermarket chain

Tesco, the UK's largest supermarket group, has increased its profits to £400m - but warned of the battles ahead.

The BBC's Sarah Boxhall: "Tesco has a war on its hands"
The group says that the consolidation in the retail sector is only just beginning as it announced plans to make price cuts of up to £300m to match those announced by rival Asda.

[ image: Price cuts could prove an expensive strategy]
Price cuts could prove an expensive strategy
Tesco's profits surged 8%, ahead of market expectations, on sales of more than £9bn.

The company said its sales would move to "higher levels than seen recently", driven by international growth.

"Looking forward, our UK business is well positioned to achieve continued growth," said Chief Executive Terry Leahy.

More than 36 percent of Tesco's space would be overseas by the end of next year, with a focus in Asia and Eastern Europe. Tesco owns stores in Hungary, South Korea, Thailand, and Taiwan, and is considering investing in Malaysia.

"Our expectations are that average earnings growth is likely to reflect this, particularly as our international business achieves economic scale," he added.

The company plans to invest £1.5bn next year, up from £1.1bn this time.

Earnings per share in the half year rose 9.5% to 4.26p. The dividend was increased by 7.2% to 1.34p a share.

At 0907GMT, shares in Tesco were up 2.75p, or 1.5%, at 186.25p.

Fierce competition

Tesco is planning to increase sales via the Internet, launching national service to allow customers to purchase goods online for home delivery. It says that service is already in profit.

It is also planning to sell more non-food products at discount prices, like mobile phones, stereos, and jeans.

Tesco said it already has a good position in home entertainment, clothing, homeware and kitchenware, but that a move into special offer white goods could be on the cards. It faces fierce competition from rivals, led by Asda which is now owned by the world's biggest store group, the US-based Wal-Mart.

European supermarket groups are also consolidating, with the merger of Carrefour and Primodes creating a supermarket giant in France with interests in 24 other countries.

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