Tesco vows to win back shoppers with price cuts as sales fall again

Retailer’s Irish unit reports another decline in revenue on back of falling sales

Trading has slumped in a number of European markets including Ireland

Trading has slumped in a number of European markets including Ireland

Wed, Apr 16, 2014, 08:09

Tesco boss Philip Clarke vowed to win back shoppers with millions of pounds of price cuts after a second year of falling profits cast doubt on his efforts to turn around the fortunes of Britain’s biggest retailer.

The world’s third-biggest retailer today reported a 6 per cent fall in annual profit, its second straight year of decline, piling pressure on Mr Clarke.

The group said trading had deteriorated throughout the 12 months, with the key figure of sales at its British stores open over a year, excluding fuel and VAT sales tax, down 3 per cent in the fourth quarter, its worst drop in Mr Clarke’s three-year tenure.

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, which had been the darling of the sector during two decades of uninterrupted earnings growth before a shock profit warning in 2012.

Tesco shares, at 10-year lows, jumped 5 per cent in early trade as Mr Clarke said he would respond to the discount groups and upmarket grocers that have hit Tesco from both sides and sent its British market share to a near 10-year low of 28.6 per cent.

“I have got no intention of going anywhere,” Mr Clarke, a 40-year Tesco veteran, told reporters. “All my waking hours are spent running Tesco. It’s what I love. I am going to see this thing through.”

Tesco’s Irish division had revenues of €2.97 billion last year, down 5.7 per cent on the previous 12 months.

The retailer said like-for-like sales in the Republic were 5.5 per cent lower.

The figures showed sales fell by 8.1 per cent and 6.4 per cent in quarters three and four respectively.

Earlier this week, data from retail analysts Kantar Worldpanel indicated Tesco’s lead in the Irish grocery market had been significantly eroded, with discount stores Aldi and Lidl being the main beneficiaries.

Tesco, the world’s third-largest retailer, with a market valuation of £23 billion and 530,000 staff, has suffered on several fronts in recent years.

Overseas, failed attempts to break into the United States and Japan and troubles in China and Europe have proved a distraction to its home market, where it still makes over two-thirds of sales. Alongside a 6 per cent fall in annual group trading profit posted yesterday, Tesco took a £734 million writedown on the value of its European businesses, where trading has slowed, and a one-off charge of £540 million in China. That puts charges and writedowns for its overseas forays at close to £3 billion in two years.