New Tesco boss Phil Clarke said the world's third-biggest retailer needs to come up with new products and services and improve general merchandise ranges after falling short of its own expectations in a tough British market.
The supermarket group said group underlying profit rose 12.3 per cent to £3.8 billion for the year ended February, in line with analysts' expectations thanks to a strong performance in Asia.
But profit in Britain, where Tesco accounts for almost £1 in every £7 spent in shops, increased 3.8 per cent, with sales at stores open at least a year falling 0.7 per cent in the final quarter, excluding fuel and VAT sales tax.
"We didn't achieve our planned growth in the year and this was only partly attributable to the deterioration in the consumer environment during the second half," Mr Clarke said of Britain, where Tesco makes over two-thirds of sales and profits.
"We can do better and we are taking action in key areas - for example, to drive a faster rate of product innovation and to improve the sharpness of our communication to customers."
International retailers are increasingly relying on emerging markets for growth as shoppers in Europe and the United States struggle with austerity measures as governments cut their debts.
British store groups have been particularly hard hit by a rapid deficit reduction plan, triggering a wave of profit warnings as shoppers cut back spending on discretionary goods.
Tesco, with over 5,000 stores in 14 countries, said group sales rose 7.1 per cent excluding VAT to £60.9 billion, just short of analysts' average forecast of £61.7 billion.
Profit in Asia jumped 17.5 per cent at constant exchange rates to £570 million, led by Tesco's second-biggest market, South Korea.
Losses in the United States widened 9.7 per cent on the same basis to £186 million. However, the group said it expected them to reduce sharply this financial year and it was on track for the business to break even in 2012-13, helped by opening new stores and the acquisition of two suppliers.
Tesco said return on capital employed, a key focus as investors look for a payback on years of heavy investment, rose to 12.9 per cent from 12.1 per cent the year before.
Capital spending for the current year would be £4 billion, up slightly from £3.7 billion in the year just ended.
Reuters
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