Tesco pays out £315 million in dividends to shareholders as sales boom

Tue 20/10/2020 by Richard Wilkinson
Tesco pays out £315 million in dividends to shareholders as sales boom © Réussir Fruits et Légumes

UK retailer Tesco has posted a 29% rise in pre-tax profits to £551 million, with sales totalling £26.7 billion. Tesco reported a 4% increase in operating profits to £1.2 billion in the six months to 29th August, as booming food sales coupled with the tax break offset a £533 million bill for extra staff and safety measures in its stores.

Tesco’s UK food sales climbed more than 9% in the period as the pandemic triggered big changes in shopping behaviour. Sales in its convenience stores were up 7.6%. In large stores, sales grew by 1.4%, as customers made fewer trips but bought more on each visit. The average “basket size” – the amount spent by shoppers per visit – increased by 56%. The biggest change was Tesco’s online business, where sales grew at 90% over the summer months. The boom reflects the rapid expansion of the delivery service with the number of slots doubling to 1.5 million a week.

However, the company has come in for criticism for paying £315 million in dividends to shareholders at a time when the supermarket chain is benefiting from a business rates holiday worth £249 million. This dividend is 20% more than in 2019.

Alan Stewart, the finance director of Tesco, said the board decided that paying dividends was the “right thing to do” for shareholders.

“We have incurred very, very significant extra cost in running the business in the year. It is against a backdrop of keeping people fed and supporting government initiatives against the vulnerable, that the business’s performance should be measured.”

Positive Money, a campaign group, criticised the Tesco move. Fran Boait, its chief executive, said:

“There needs to be conditions to ensure that any company receiving public support in a time of crisis isn’t wasting money on paying out dividends to wealthy shareholders.”

“For Tesco to accept this relief, and then be able to turn around and pass the benefit straight on to shareholders, shows that the system is not fit for purpose – public funds should not be captured as private profit,” said senior economist Sarah Arnold.

However, the dividend decision pleased the City. Richard Hunter, head of markets at Interactive Investor, said the cash would be welcomed by investors “given the dearth of payouts at present”.

“The increase is a healthy sign of confidence from the company in its prospects”.

Subscribe to our Newsletter

Most read on social media

Popular news