Every little helps: Tesco reports rise in profits as trains in Spain remove supply chain pain

Thu 7 Oct 2021
Posted by: William Barns-Graham
Trade News

tesco

Tesco has reported a rise in profits for the first half of 2021 and credited an increase in the use of rail freight for helping it deal with the supply chain disruption that has wreaked havoc elsewhere in the retail sector.

Sales at Britain’s biggest supermarket rose 3% to £27.3bn in the six months to 28 August and profits soared by 107% to £1.1bn.

Chief executive Ken Murphy heralded the role of rail freight in keeping stores stocked in the Guardian yesterday (6 October), as the wider industry struggles to find HGV drivers.

Spain trains

As previously covered in the IOE&IT Daily Update, Tesco is to further increase the amount of fruit and vegetables it moves from Spain by chilled rail trains.

It currently moves 65,000 40-foot containers at present and this is set to expand to 90,000 by the end of the year.

More trains

The company will also add two weekly trains to the five that it already runs, including one to Scotland.

Murphy said Tesco was one of only three retailers that used a significant amount of rail freight, and that it was “a fantastic story from a sustainability point of view” as well as helping supply chain resilience.

“As industry supply chains came under increasing pressure, we were able to leverage our strong supplier relationships and distribution capability to maintain good levels of availability for customers, contributing to our market out-performance,” he said.

Christmas stock

Murphy said he did not expect significant stock shortages in the run-up to Christmas due to Tesco’s strong relationships with suppliers.

It has already secured 10% more turkeys for Christmas than last year, with sales of frozen birds rising.

Tesco will also take on 30,000 temporary staff for Christmas, with half already in place, said Murphy.

Others still struggling

While Tesco seems to have an answer for all of the problems currently plaguing British business, it’s position cannot be taken as evidence the other companies are not struggling, according to commentator Cat Rutter Pooley in the FT.

“Boris Johnson may applaud the success of businesses such as Tesco. What he cannot expect is all companies to follow suit,” she writes. “Tesco’s numbers show the strongest surviving and thriving. Those further down the food chain may still need some help.”

The retailer’s size meant it could outbid competitors for labour and secure better deals from suppliers to keep its prices to customers down, Pooley argues.

Tesco also benefitted from the pandemic-driven increase in home shopping and grocery buying when the hospitality sector closed.

Spanish strikes

Tesco may, however, be keeping an eye on industrial action on the Spanish railways.

Strikes are scheduled for dates throughout October, according to Garda.