Ranila's world

 Tesco, the country's largest supermarket chain, rang in a record 2.55 billion pounds annual profit on Tuesday and doubled the amount of cash it plans to return to shareholders.

The world's fifth-largest retailer said it expected to return at least 3 billion pounds from property sales to investors, up from 1.5 billion previously after delivering strong sales growth in premium food, clothing and electronics.

It also raised the estimate of its property value to around 25 billion pounds, making it the largest listed landowner.

Group sales at Tesco, which owns some 2,000 stores in 13 countries including China and Poland, rose 10.9 percent to 46.6 billion pounds, broadly in line with analyst expectations. Underlying profit rose 13.2 percent 2.55 billion pounds.

Tesco shares jumped to a new high of 467-3/4 pence in early trading. At 10:00 a.m., they were up 2.0 percent at 464.67 pence, the biggest rise on the FTSE-100 index and valuing the business at about 37 billion pounds.

In a note following the results, Bernstein analyst Christopher Hogbin said Tesco had "superior strategy, execution, economics and prospects" compared with its peers.

In an interview, Chief Executive Terry Leahy brushed aside criticism about the group's dominance in Britain, where it controls more than a third of the grocery market, and said it was a "significant British success story".

Tesco, facing a growing challenge from supermarket rivals Asda and a resurgent J. Sainsbury, also said like-for-like sales in its core UK market, excluding fuel, rose 5.8 percent in the final quarter of its financial year, which ended on February 24.

This was up from a third-quarter rise of 5.6 percent.

Its strong fourth-quarter growth at home allayed fears it was losing ground to smaller Asda and J. Sainsbury, Seymour Pierce analyst Richard Ratner said in a note.

U.S. ENTRY

Numis analyst Steve Davies said international trading profit of 564 million pounds came ahead of his forecasts.

Leahy said he expected again to open four times as much new space abroad as at home as the company focuses on international expansion for future growth after opening 8.2 million square feet of selling area outside Britain in 2006.

It plans to add 25,000 new jobs in 2007, many of them outside Britain, to its more than 450,000 workforce.

The company's entry into the United States, its biggest forecast foray this year after opening its first own-brand stores in China in 2006, was on track, Leahy added.

Leahy said he was "increasingly encouraged" about Tesco's prospects in the United States and reiterated it plans to breakeven in its third financial year of operations.

He raised Tesco's U.S. start up costs to 65 million pounds this year from 20 million previously.

Retailers are facing tough trading conditions as debt-laden shoppers try to cope with higher borrowing costs and household bills. Supermarket groups, however, are faring better than many specialist stores, with their focus on low prices.

"Clearly consumers are feeling the effects of higher interest rate rises and higher council tax," Leahy said.

"But I suppose if we are offering exceptional value, they come to us which is perhaps a strength going forward in a time of consumer pressure."

Leahy said Tesco is looking for 3 to 4 percent UK growth -- a target it has consistently beaten.

Tesco's rapid expansion into non-food -- from discount garden sheds to leather golfing gloves costing three pounds -- could also help it weather any souring sentiment.

While DVD and CD sales declined last year due to customers increasingly downloading from the Internet, clothing sales rose 16 percent and electronics were up 35 percent.

The firm proposed an annual dividend of 9.64 pence a share, up 11.7 percent on the year before.

(By Rachel Sanderson Reuters - Tuesday, April 17 Additional reporting by Mark Potter)