Tesco has today raised its full-year outlook as it reported a 16.6% rise in first-half core retail profit and increased sales despite labour and supply chain disruption and tough Covid-19 related comparisons a year ago.
The group said its strong first-half performance had enabled it to reduce net debt by £1.7 billion since February.
It added that it would therefore use cash for a share buyback, with the first tranche of £500m in shares to be bought by October 2022.
Tesco forecast a full-year 2021-22 adjusted retail operating profit of between £2.5 billion and £2.6 billion, having previously forecast a similar outcome to 2019-20, when it made £2.3 billion.
The company made adjusted retail operating profits of £1.386 billion in the first half - ahead of analysts' average forecast of £1.262 billion and £1.192 billion made in the same period last year.
First-half group sales rose 2.6% to £27.3 billion, while UK like-for-like sales rose 1.2%, having risen 0.5% in the first quarter.
Tesco said its Irish first quarter sales fell by 6.1% due to the impact of stockpiling the same time last year, which it noted was particularly marked due to earlier and stricter lockdown restrictions than in the UK.
In the second quarter, like-for-like sales grew by 1.2% on the back of a strong clothing performance and seasonal events such as Back to School, gardening and Father's Day.
Tesco noted that its two year like-for-like sales in Ireland grew by 12.2% with a strong performance across all categories and channels.
It said its Irish online business continued to perform exceptionally well with like-for-like sales growth of 74.8% on a two-year basis and +10.8% on a one-year basis. Online sales now represent about 8% of its total Irish sales.
Kari Daniels CEO of Tesco Ireland said she is very pleased with the performance of the business despite the ongoing challenges posed by Covid-19.
"I'd like to thank our 13,000 colleagues right across the business for their continued dedication, hard work and support of each other whilst helping to serve our customers, communities and planet a little better every day," she said.
Tesco said it would pay an interim dividend of 3.2 pence, in line with the prior year.
"We've had a strong six months - sales and profit have grown ahead of expectations, and we've outperformed the market," Tesco chief executive Ken Murphy said.
"With various different challenges currently affecting the industry, the resilience of our supply chain and the depth of our supplier partnerships has once again been shown to be a key asset," he said.
Analysts say Tesco is benefiting from its huge online business, from a pricing strategy that matches the prices of German-owned discounter Aldi on around 650 products and the success of its "Clubcard Prices" loyalty scheme which offers lower prices to members.
However, chairman Tesco chairman John Allan told ITV last month that supply chain disruption meant food prices could rise by 5% this winter.
Tesco's share price has risen about 10% so far this year but has underperformed both Sainsbury's and Morrisons.
Morrisons, which is being taken over by US private equity group Clayton, Dubilier & Rice, is up 60%, while Sainsbury's, also buoyed by takeover speculation, is up nearly 33%.
