Financial Review

Retailing underlying operating profit

  Supermarkets Convenience Total
Retailing store numbers
and space summary		 Number Area
000 sq ft 		Number Area
000 sq ft 		Number Area
000 sq ft
As at 25 March 20061 472 16,090 280 635 752 16,725
New stores 20 375 20 53 40 428
Closures (2) (34) (2) (5) (4) (39)
Extensions/downsizes/refurbishments   249   1   250
As at 24 March 2007 490 16,680 298 684 788 17,364
Memorandum            
Extensions 18 272 – – 18 272
Downsizes 1 (35) – – 1 (35)
Refurbishments/conversions 50 12 52 1 102 13
Complimentary non-food 48 – – – 48 –
Total projects 117 249 52 1 169 250
  1. Reflects central supermarkets reclassified from Convenience to Supermarkets and other size adjustments.

Retailing underlying operating profit increased by 21.9 per cent to £429 million (2006: £352 million) reflecting the strong sales performance and a 30 basis point improvement in retailing underlying operating margin (ex VAT) to 2.54 per cent for the year (2006: 2.24 per cent). Continued improvement in operational gearing has been driven from higher sales volumes and further cost savings. This helped to mitigate the impact of continued investment in price and product quality and higher energy prices in the second half.

Key areas of cost saving have been in supply chain, labour and IT costs and there continues to be a focus on managing central costs and improving stock loss although shrinkage challenges remain an issue as the external environment remains tough. Overall, the Group remains on track to achieve the £440 million cost savings over three years that underpin the MSGA recovery plan and supports investment in the customer offer.