UK: Tesco’s profits fall for second year in succession
PUBLISHED: 09:20 16 April 2014 | UPDATED: 14:35 16 April 2014
Tesco’s annual profits have fallen for the second year in succession while latest UK sales figures showed a worsening decline, putting renewed pressure on embattled chief executive Philip Clarke.
Underlying pre-tax profits at Britain’s biggest supermarket were down 6.9% to £3.05billion for the year to February 22 while like-for-like sales dipped by 3% in the fourth quarter, the group said.
Tesco admitted that it had done worse than expected amid increasingly tough competition, saying: “Our performance in the year was not where we had planned it to be.” Like-for-like sales for the year in the UK were down 1.4%.
The supermarket warned that the challenging environment would continue in the current financial year.
It also revealed a one-off charge of £801million mainly relating to a write-down of assets in Europe, as well as a £540m impairment relating to its Chinese business.
Group trading profit was down 6% to £3.3bn while statutory profit before tax was up 9.8% to £2.3bn, reflecting the impact of one-off charges in this year and last year’s results.
Mr Clarke said: “Our results today reflect the challenges we face in a trading environment which is changing more rapidly than ever before. We are determined to lead the industry in this period of change.”
The chief executive brushed off speculation about his future amid the continuing decline in performance.
He said: “I have got no intention of going anywhere. All my waking hours are spent running Tesco. It’s what I love. I’m going to see this thing through.”
Mr Clarke also said that a pledge to invest £200m in price cuts was “just a start”. Staples including milk, eggs and butter have already been reduced by an average of 24%.
But he declined to set out the level of further commitment, saying it was commercially sensitive, despite pressure to match rivals’ outlays. Morrisons has said it will invest £1bn in price cuts over three years.
Mr Clarke said: “It would be reckless of me to put another number on it.”
But he insisted: “We have got a big and bold plan and customers are going to get better value.
“We have always said that £200m was the start and we retained the flexibility to do what we thought was necessary and will continue to retain that flexibility. You’ll see more prices coming down at Tesco in the weeks and months ahead.”
He stressed the importance of Tesco’s “refresh” programme to update stores, typically delivering a sales uplift of 3%-5% per store, as well as online initiatives and the ongoing expansion of convenience stores.
The convenience network now numbers nearly 1,700 Express stores and more than 700 one-stop stores.
Mr Clarke also defended the group’s previous record of international expansion in the wake of the latest hits to its balance sheet from overseas ventures - and a 27.7% fall in profits in Europe, to £238m.