Supermarket chain Tesco has reported losses of nearly £6.4bn in its preliminary year-end results, exacerbated by a significant reduction in its UK trading profit.
The retailer made £1.4bn in group trading profit, which it said was “in line with expectations”. But this was 58% lower than the £3.3bn of profit that it reported for the year ending February 2014.
Tesco was forced to pay £7bn in one-off charges during the last 12 months and its performance was hit by a fall of £4.7bn in the value of its property portfolio, as it prepares to close more than 40 UK stores. The company also cited “tough trading conditions overseas, especially in Korea” and “disappointing performance in Europe” as further reasons for today’s underwhelming announcement.
But the company’s new chief executive claimed that, amid the bad press, there were still some “encouraging signs” for the retailer.
Dave Lewis said: “It has been a very difficult year for Tesco. The results we have published today reflect a deterioration in the market and, more significantly, an erosion of our competitiveness over recent years. We have faced into this reality, sought to draw a line under the past and begun to rebuild, and already we are beginning to see early encouraging signs from what we’ve done so far.”
In February, we reported that the chain was cutting 25,000 products from its bloated portfolio in a bid to become more competitive with the discount supermarkets.
“Over the last six months we have put customers back at the centre of everything we do. By focusing on the fundamentals of availability, service and targeted price reductions, we have seen a steady increase in footfall, transactions and, most significantly, volumes. More customers are buying more things at Tesco.
“We are making deep changes to the way we organise and run our business, with a simpler, more agile office team, more colleagues serving customers and a new approach to the way we work with suppliers. I do not underestimate how difficult some of these changes have been for the team and I thank everyone for their professionalism and contribution at this time of great change.
“The market is still challenging and we are not expecting any let up in the months ahead. When you add to this the fundamental changes we are making to our business and our offer, it is likely to lead to an increased level of volatility in short-term performance. Our clear priority – and the one that will deliver sustainable value for our shareholders – is to improve consistently for customers. The changes we have made and will continue to make put us in a stronger position to do this.”
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