Tesco begins first stage of £750m share buyback scheme

Tesco begins first stage of £750m share buyback scheme as the supermarket giant continues to enjoy strong trade

  • Tesco’s annual pre-tax profits more than trebled to just over £2bn last year
  • It has appointed HSBC to repurchase shares worth up to £150m on its behalf 
  • The company’s buyback programme comes amidst a major cost-of-living crisis

Supermarket giant Tesco has begun the latest stage of its share buyback programme.

The company has appointed HSBC Bank to repurchase shares worth up to £150million on its behalf as part of a £750million scheme, which was announced three months ago on the publication of its full-year results.

They showed the group’s pre-tax earnings more than trebling to just over £2billion thanks to high sales, reductions in Covid-related costs and the return of its banking division to profitability.

Share Buyback: Supermarket giant Tesco said it had appointed HSBC Bank to oversee the repurchasing of up to £150million of its shares as part of a £750million scheme

Having already returned £300million of capital to shareholders in the previous financial year, Britain’s biggest supermarket hopes to have bought £1.05billion of its own shares by April next year.

This is despite the business recently noting that shoppers have started cutting back on some items as a cost-of-living crisis bites, with the UK inflation rate currently at a four-decade high.

Revealing its first-quarter results in mid-June, Tesco said clothing and general merchandise sales had experienced a particularly significant decline, while online sales had fallen 14.5 per cent from the previous year.

Chief executive Ken Murphy told investors: ‘Although difficult to separate from the significant impact of lapping last year’s lockdowns, we are seeing some early indications of changing customer behaviour as a result of the inflationary environment.’

To try and stop customers from shopping at other grocers, the FTSE 100 firm has focused on widening the distribution of its budget ranges, Aldi Price Match and Low Everyday Prices.

The approach appears to be paying off as its share of the British grocery sector has continued growing in spite of massive competition from German discount grocers Aldi and Lidl.

For the period covering the 12 weeks to 12 June, Tesco was the only one of the ‘Big Four’ supermarkets to boost its market share on a sales value basis.

By comparison, Asda saw its total share of the market drop from 14.1 per cent in the same period last year to 13.7 per cent, while Morrisons’ share fell 0.5 percentage points to 9.6 per cent.

Both grocery chains have recently been taken over by private equity houses, with the former acquired by the Issa brothers and TDR Capital for £6.8billion in 2020 and the latter obtained by Clayton, Dubilier and Rice for £7billion nine months ago. 

Tesco shares were up 1.1 per cent to 257.6p just after 10:30am on Monday, although their value has fallen by over 12 per cent so far this year. 

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