Tesco shares fall sharply despite profits increase

By John-Paul Ford Rojas, business reporter
Tesco shares have suffered a sharp fall despite an increase in half-year profits as results from the supermarket giant missed expectations.
The group said pre-tax profits for the six months to 25 August were 2% higher than the same period last year at €564m, with UK like-for-like sales up 2.3%.
But its performance in overseas markets was less encouraging, leaving the improvement in earnings short of what investors had been expecting. Shares closed 8.6% down.In the UK, Tesco said it had made a "significant investment" in lowering the price of a series of new exclusive own-brand ranges and was midway through a re-launch of all its own-brand products, focused on fresh food.Clothing sales were boosted by the popularity of World Cup-linked menswear while general merchandise sales declined as the supermarket cut back its offering in areas such as electrical goods.The results come weeks after Tesco chief executive Dave Lewis launched its new cut-price store chain Jack's, which is due to open up to 15 outlets this year and is seen as a response to the threat of discount rivals Aldi and Lidl.Elsewhere, the business is facing the prospect of a merger between Sainsbury's and Asda, Britain's second and third biggest supermarket chains - whose combined share of the market would outstrip that of Tesco.Meanwhile, Tesco recently announced a "strategic alliance" with French supermarket giant Carrefour aimed at helping the two when dealing with major suppliers.The latest results showed UK sales growth for the half-year at the same level as it was for the previous six months.
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