Tesco boss rejects Asda's number one claim

Speaking yesterday as the retailer announced a 10 per cent increase in annual profits, Tesco's chief executive Terry Leahy said the group has a low market share in the non-food sector and plenty of scope for growth.

Asked whether he would contest Asda's claim that it can topple Tesco, he said: "Yes, that is probably something I'd contest. My experience is that it's best not to make forecasts. There is plenty of opportunity for us to grow in non-food."

Leeds-based Asda outlined plans to leapfrog Tesco in non-food sales in a presentation to analysts last week. Tesco is now set to hit back with more clothing lines to take on George at Asda.

It also has plans to expand its standalone non-food format, Homeplus, which offers a whole range of non-food products from clothing and bikes to phones and computers.

The group said it couldn't say how many Homeplus stores it intends to open. It currently has 13.

Asda, which is owned by US retail giant Wal-Mart, has outlined plans to open 150 Asda Living stores by 2015. The group currently has 25 outlets, but said it would take over the number one non-food position by 2015.

Speaking yesterday, Sir Terry said Tesco sees little risk of a dip back into recession in the UK despite a slowdown in recent sales growth.

The group, which runs over 4,300 stores across 14 countries, met forecasts with a 10 per cent increase in annual pre-tax profits to a record 3.4bn.

Tesco also outlined plans to create 9,000 new jobs in the UK this year including 800 in Yorkshire and the Humber.

The group, which currently has 123 stores employing over 13,000 staff across Yorkshire and Humber, said it will continue to work with local suppliers across the region.

It currently has over 40 Yorkshire suppliers, which provide the region's stores with over 160 local lines.

Tesco's performance came despite UK sales growth slowing to 3.2 per cent in the year to February 27 amid fierce competition from rivals and lower food inflation.

Tesco, which makes about 70 per cent of its profits in Britain, said like-for-like sales at its UK stores rose 2.7 per cent in the second half, down from 3.7 per cent in the first half.

Some analysts pointed to a slowdown in UK sales growth towards the end of the financial year and noted that the group did not give figures for recent weeks.

JP Morgan Cazenove analysts said this implied growth of just 0.6 per cent in the final seven weeks to February 27, after a strong Christmas.

Grocers are suffering from a drop in food price inflation. Last week Asda, the UK's No.2 grocer behind Tesco, said the market had slowed sharply.

Many UK retailers fear consumer spending could slow after the May 6 elections.

But Sir Terry said that although the public finances have to be put in order, that won't set back the long term economic recovery.

He added that Tesco tends to do well when people are "getting by and don't feel wealthy", whereas it doesn't do so well in times of economic boom.

Sir Terry said that Tesco had not suffered much from the recent disruption to international air travel, as less than one per cent of its products are brought in by air.

The group is arranging to pick up flowers from Kenya in Spain.