Tesco has seen pre-tax profit soar to £551million in the first half of 2020 – almost a 29% increase on the same period in 2019.
The retailer said its revenue of £28.7 billion was up 0.7% and sales in the UK and Ireland were up more than 8%.
But costs on fighting the effects of the Covid-19 pandemic reached more than half a billion pounds.
The business has been focusing on prices in recent months, trying to out-compete rival Aldi, which has been eating into the market share of more established retailers.
And it expects to create around 11,000 temporary jobs to deal with the Christmas rush.
The half-year results mark the first outing as boss for Ken Murphy, who took over the reins at the UK’s biggest supermarket last week.
The former Walgreens Boots Alliance executive said that a shift to online shopping at Tesco will continue into the future.
Stay up to date with our daily newsletter, email breaking news alerts and weekly round-ups. To sign up, find out more and see all of our newsletters, follow the link here
Last week, the company had its biggest ever week online, finance boss Alan Stewart revealed.
Mr Murphy said: “Clearly there’s been a massive shift online, and we think that a significant proportion of that will be maintained for the foreseeable future.
But he was coy about his other plans, as he steps into one of the most high-profile jobs in British retail.
“This is less about me making my mark and much more about delivering for customers,” he said.
Tesco will start hiring around 11,000 temporary workers for the busy Christmas period later this month.
Susannah Streeter, an analyst at Hargreaves Lansdown, said: “Tesco can still benefit from consumers tightening their belts, by pushing its value range offers in store.”
However, she warned that the tough economy will continue to weigh on Tesco Bank.
The bank has allowed loan and credit card payment breaks until the end of October but must also increase provision for bad debts.
It is now expected to lose between £175 million and £200 million in the current financial year after losing £155 million in the first half. Last year it made a profit of £87 million in the first six months.
However, Tesco has “no plans” to sell the bank, whose problems are almost entirely related to Covid-19, Mr Murphy told reporters.
The supermarket’s UK sales rose by 8.6% to £24.3 billion in the six months, but it spent £533 million responding to the crisis.
However, the costs were offset by a £249 million benefit as the Government suspended business rates payments, along with higher food sales, Tesco said.
The company now expects operating profit from its retail division for this year to reach at least the same levels as its last financial year.
Investors will be paid a 3.2p interim dividend, up 21% compared with last year, but can also expect a share of a £5 billion payout after the sale of Tesco’s Asian arm completes at the end of the year.
In March, the global chain sold off its Thai and Malaysian arm, consisting of about 2,000 shops, for £8 billion.
Following the sale, bosses promised to return £5 billion from the sale to shareholders – around 51p per share.