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Tesco Announces First Fall In Profits In 20 Years

Published on Apr 18 2013 9:39 AM in Retail

Tesco Announces First Fall In Profits In 20 Years

Tesco has reported a fall in profits for the first time in 20 years coupled with a £1.2 billion loss as it abandons its US Fresh & Easy business.

The retailing giant said on Wednesday (17 April) that its pre-tax profits halved, falling 51.5 per cent to £1,960 million with group trading profit down 13 per cent. Group sales rose 3.1 per cent at constant rates totalling £72.4 billion, slipping 0.3 per cent in Britain on a like-for-like basis, excluding petrol, to £48,216 million.

Tesco’s Asia business delivered sales growth of 5.9 per cent to £12,317 million, while Europe fell 4.9 per cent to £10,809 million, with particularly difficult trading conditions in central Europe.

As expected, the retailer announced its exit from the US market, pulling the plug on its Fresh & Easy business which started up in 2007. The exit is to cost Tesco £1.2 billion, ‘predominantly the impairment of fixed assets and provisions for onerous leases,’ it said. Philip Clarke, group CEO said, “Big decisions come at a cost, but that won’t deter us from taking them, because they are the right decisions for our long term success.”

Clarke said Tesco’s £1 billion push to ‘Build a Better Tesco’ in the UK has started to pay off, with an improved underlying performance. Food, the main focus of its efforts, showed an improvement he said, although general merchandise showed a 5 per cent decline. Clarke also announced a once-off write-down of £804 million on its UK property.

The group’s main priorities are to strengthen its UK business, establish multichannel leadership in all of its markets and to pursue ‘disciplined international growth’. Clicks & Bricks is at the heart of Tesco’s strategy for the future of the business, it said, with online grocery sales up 12.8 per cent to £2.3 billion. The retailer plans to open more than 150 Click & Collect locations in the year ahead to support this growth.

Convenience retailing is also a priority for Tesco, having opened 120 Express and 26 One Stop stores during 2012 and with plans underway to open more convenience stores in 2013. 

Clarke also said the popular Tesco Finest private label range is to be re-launched in 2013.

"Our focus now is on disciplined and targeted investment in those markets with significant growth potential and the opportunity to deliver strong returns," added Clarke. (18 April)

© 2013 - ESM: European Supermarket Magazine by Sadhbh Connor

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