Tesco reports 51.5% fall in pre-tax profits

Supermarket chain announces first fall in profits in nearly two decades

Supermarket chain Tesco has reported a 51.5 per cent fall in pre-tax profit for the year to February, the company's first fall in profits in nearly two decades.

The UK's biggest retailer also confirmed it will exit its loss-making business in the United States, taking a £1 billion writeoff that knocked its year profit down for the first time in two decades.

The group also wrote down the value of its property in Britain, by £804 million , and took a writedown on its businesses in Poland, Czech Republic and Turkey of half a billion pounds.

The raft of announcements form part of Tesco's fightback following a tough period for what was once one of Britain's most consistently performing companies. Its full year results also showed that growth in its core home market and in Ireland had slowed.


"The announcements made today are natural consequences of the strategic changes we first began over a year ago and which conclude today," chief executive Philip Clarke said.

The company reported a pretax profit of 1.96 billion pounds in the year to February 13th, down 51.5 per cent. It also reported a 14.5 per cent fall in underlying full-year profit, largely reflecting the cost of a turnaround plan for its home market, launched after a shock profit warning in January last year.

Despite heavy investment, the group said fourth quarter sales at British stores open over a year, excluding fuel and VAT sales tax, grew 0.5 per cent - a slowdown from growth of 1.8 per cent in the six weeks to January 5th.

Tesco's £1 billion pound fightback plan for Britain focused on more staff, refurbished stores, revamped food ranges and price initiatives - all aimed at reversing years of underinvestment and halting a loss of market share to rivals like J Sainsbury and Asda.

Earnings have also been hit by the impact of the euro zone debt crisis on eastern European markets, restrictions on store opening times in South Korea, and losses at the US business Fresh & Easy.

In the U.S., it has decided to exit altogether. Fresh & Easy, which trades from 199 stores and employs around 5,000, has absorbed over 1 billion pounds of capital since its 2007 launch when

Tesco was run by Clarke's predecessor Terry Leahy but has never turned a profit in a market where it competes with the likes of Trader Joe's, Whole Foods Market and Wal-Mart Clarke put the venture, which contributes just 1 percent of group turnover, under review in December, saying an exit was likely.

The group made an underlying pretax profit of £3.55 billion. That compares to analysts' consensus forecast of £3.50 billion, according to a company poll, and with £3.92 billion made in the 2011/12 year.