Tesco reports 6% drop in annual profit

Wednesday 16 April 2014 14.01
Sales at Tesco stores dropped particularly sharply in the past three months
Sales at Tesco stores dropped particularly sharply in the past three months

Tesco has said it expected tough trading to continue as it posted a 6% fall in annual profit, its second straight year of decline.

The world's third-largest retailer said group trading profit for the year to 22 February was £3.3bn, in line with analysts' forecasts of £3.24bn but down on the £3.45bn posted in 2012-13.

Group revenue, including VAT, was 2% lower at £70.9m during the past year.

In Ireland, the company had revenues of €2.97bn - down 5.7% on figures from 2012-13, while like-for-like sales were 5.5% lower than last year.

The second half of the year was particularly bad for its Irish business, with sales falling 8.1% and 6.4% in quarters three and four respectively.

Tesco said this trend reflected the fact that Irish consumers "remain under pressure", also cited "intense vouchering activity" in the market here.

On Monday Kantar Worldpanel data suggested that Tesco's lead in the Irish grocery market had narrowed substantially, with discounters like Aldi and Lidl being the main beneficiaries of its drop in sales.

This trend is echoed in the company's performance in Britain too, where like-for-like sales fell 3% in the fourth quarter, the sharpest quarterly drop recorded during Chief Executive Phil Clarke's three year tenure.

The decline increases the heat on Mr Clarke, two years into a turnaround plan which - despite billions spent - has failed to stop its core market share slipping, under pressure from hard discounters Aldi and Lidl.

Mr Clarke has vowed to win back shoppers with millions of pounds of price cuts following the results.

Despite calls from investors to quit or change tack, with several worried about a price war, Mr Clarke insisted he would see through his "bold" plan to rebuild the company.

"I have got no intention of going anywhere," Mr Clarke told reporters. "All my waking hours are spent running Tesco. It's what I love. I am going to see this thing through."

One of Tesco's largest 20 investors was reported yesterday as having called Mr Clarke the "wrong person for the job" with the "wrong strategy".