Tesco ready to defy tough times with record-breaking results

Chief executive Philip Clarke is likely to reveal a £3.8bn underlying profits haul in his inaugural set of full-year results since taking the top job on March 1.

But the improvement – up from £3.4bn the year before – comes against increasingly difficult conditions for Britain’s retailers. As well as having a tough act to follow in predecessor Sir Terry Leahy, Mr Clarke is faced with a tough trading climate as spending slows.

Consumers are tightening their belts as the Government’s austerity measures start to bite, which is hitting supermarkets hard.

Rival Sainsbury’s recently shocked the market with fourth-quarter like-for-like growth of 1 per cent, excluding fuel, implying an underlying fall of up to 1 per cent when VAT is stripped out, and an even bigger decline after inflation.

The sector has been slashing prices to lure in cost-conscious consumers.

Official inflation figures this month revealed that food prices declined by 1.4 per cent in March – the biggest month-on-month drop since between June and July 2007 – as supermarkets rolled out heavy discounts.

This helped the overall rate of UK inflation to ease back to 4 per cent from 4.4 per cent in February.

Tesco has upped the ante, launching a £200m price war with Asda after a poor Christmas left it trailing behind its closest rival.

Tesco posted a sales rise of 0.6 per cent for its six-week festive period, against Asda’s 2.6 per cent hike in like-for-like sales.