Tesco’s first-half profit falls as Murphy era begins

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LONDON, Oct 7 (Reuters)Tesco TSCO.L, Britain’s biggest retailer by sales, on Wednesday reported a 15.6% fall in core profit, with a jump in sales due to the COVID-19 pandemic more than outweighed by higher costs and losses at Tesco Bank.

The group, led since the start of the month by new chief executive Ken Murphy, made operating profit before one-off items of 1.037 billion pounds ($1.34 billion) in the 26 weeks to August 29, down from 1.229 billion pounds in the same period last year.

However, the group forecast that retail operating profit in the full 2020-21 year would be at least the same level as 2019-20 on a continuing operations basis.

UK like-for-like sales rose 7.6% in the first half, having been up 8.7% in the first quarter, while the response to the pandemic led to 533 million pounds of costs.

Tesco Bank made a loss of 155 million pounds and a loss of 175-200 million pounds is still expected for the full year.

Murphy, formerly at healthcare group Walgreens Boots Alliance WBA.O, succeeded Dave Lewis, who in his six years at the helm put Tesco back on track after an accounting scandal and refocused the group on its home market.

But Tesco still faces major challenges, most notably the long-term impact of the pandemic, a recession and disruption when Britain’s Brexit transition period finishes at the end of 2020.

Shares in Tesco, which has a 27% share of Britain’s grocery market, went sideways during Lewis’ tenure and last week the group briefly lost its position as Britain’s most valuable food retailer to online specialist Ocado OCDO.L.

The group also named Tate & Lyle’s TATE.L Imran Nawaz as its new finance chief. He will succeed Alan Stewart who is retiring in April.

($1 = 0.7756 pounds)

(Reporting by James Davey, editing by Estelle Shirbon and Paul Sandle)

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