TESCO has reported its first annual increase in UK sales for seven years as the supermarket's recovery under boss Dave Lewis continues to gather pace.
The grocery giant saw like-for-like UK sales rise 0.9 per cent in the year to February 25, its first annual growth since 2010. Like-for-like food sales in the UK were up 1.3 per cent.
The grocery giant said operating profits rose 30 per cent to £1.28 billion, while group sales increased 3.7 per cent to £55.9 billion.
Mr Lewis said: "We are ahead of where we expected to be at this stage, having made good progress on all six of the strategic drivers we shared in October.
"We are confident that we can build on this strong performance in the year ahead, making further progress towards our medium-term ambitions."
However, on a statutory basis, pre-tax profits fell to £145 million from £202 million after the firm booked an exceptional £235 million charge linked to payments to UK authorities over its 2014 accounting scandal.
Shares were down 3.27 per cent in morning trading as investors digested the news.
Mr Lewis also used the results to make the case for Tesco's proposed £3.7 billion merger with Booker, reiterating his view that it will add shareholder value.
He said: "Our proposed merger with Booker will bring together two complementary businesses, driving additional value for shareholders by realising substantial synergies and enabling us to access the faster growing 'out of home' food market."
His comments come after a number of investors spoke out against the deal in recent weeks.
Both Schroders and Artisan, which own 9 per cent of Tesco, have publicly said it should be called off, insisting that the price being paid is too high and that a merger will distract from the core business.
The tie-up is also expected to face scrutiny from the Competition and Markets Authority (CMA), which could force Tesco to offload stores if it deems the deal harms competition.
The chief executive also addressed rising inflation, saying that Tesco is working with suppliers to "mitigate" the impact for consumers.
"Our principle is to minimise inflation, but we are not unrealistic, we know there are real pressures. The last place we want to go is to increase price for customers, we would only do that after exhausting every other option."
British businesses have been stung by the Brexit-induced collapse in the pound, which has led to soaring costs, many of which have been passed on to consumers.
Last year Tesco was left grappling with a shortage of store cupboard staples - including Marmite, Pot Noodle and Persil - after refusing to bow to Unilever's demands for a 10 per cent price rise following sterling's fall.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "Imported food inflation is also coming back into the system, which presents a challenge for supermarkets as the sector is so competitive that raising prices risks losing customers to cheaper rivals.
"That's particularly the case given the squeeze on household budgets we are likely to see as prices generally rise on the back of weaker ster
