Tesco under pressure after profits slump 6% to £3.3bn

Apr 16, 2014

Tesco profits decline for second year in a row as it loses shoppers to discount rivals Aldi and Lidl


TESCO has announced a six per cent drop in its group trading annual profit to £3.3bn – its second consecutive drop in profits.

The fall is not as bad as some analysts expected, says the BBC, with many forecasting a drop of up to 10 per cent. However, the Financial Times reported yesterday that chief executive Phillip Clarke has been facing calls from some of Tesco's top shareholders to step down, amid escalating problems at the retailer.

The supermarket says that like-for-like sales, which strip out the effect of new store openings, fell by 1.4 per cent, while the value of its European business – hit by the eurozone crisis – suffered a £734m loss. Group trading profit was also down 5.6 per cent in Asia to £692m.

Nevertheless, the supermarket reported strong growth of 11 per cent in its UK online grocery sales and sales at its Tesco Express stores grew by 1.1 per cent.

Tesco's core UK market share has fallen to a near ten-year low. The 'big four' supermarkets, Tesco, Morrisons, Asda and Sainsbury's, lost market share in the first 11 weeks of 2014 to discount stores Aldi and Lidl, as well as upmarket rivals Waitrose and Marks & Spencer.

Clarke, who became chief executive three years ago, said:  "We are transforming Tesco through a relentless focus on the most compelling offer for our customers.

"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."

Tesco's finance director Laurie McIlwee resigned at the beginning of this month after 15 years with the company, following a 23.5 per cent fall in half-year pre-tax profits in October and what is believed to have been unrest among investors.

After 20 years without a drop in profits, the supermarket has now reported declining earnings two years in a row.

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