Philip Clarke, the new CEO of Tesco, said today (19 April) the retailer “can do better” in the UK after the country’s largest retailer posted flat annual sales in its domestic market.
Clarke said Tesco needed to drive a faster rate of product innovation and to “improve the sharpness” of its communication to customers.
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For the year ended 26 February, the retailer recorded a 7.8% increase in group trading profit to GBP3.7bn (US$6.01bn). Group sales at the world’s third-largest retailer rose 8.1% to reach GBP67.6bn.
In the UK, meanwhile, trading profit was up 3.8% at GBP25bn, while sales grew 5.5% to GBP44.6bn. However, like-for-like sales in the UK, excluding VAT and petrol, were flat for the year – and fell 0.1% in the second half of Tesco’s fiscal year.
The retailer said that it “continued to perform ahead of the market” in its UK food and drink categories, although growth in some of its other product areas were below expectations, “particularly during the second half”.
Clarke said Tesco’s Asian and European operations contributed nearly 70% of its profit growth in the year.
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By GlobalDataTrading profit in Asia was up 17.5% to reach GBP570m, while sales grew 9.7% to GBP11.02bn. Tesco said that the increases were driven by improving like-for-like sales growth, as well as a “useful contribution from new stores” and further benefits from its acquisition of Homever in South Korea in 2008.
In Europe, the retailer said it booked “record results” and “the strongest growth in sales, profits and margins for several years”, with trading profit up 13.1% to GBP527m. Sales grew 7.4% to GBP10.5bn.
Clarke said Tesco’s “momentum” in the US was “building” but he admitted the company’s Fresh & Easy business “still has some way to go”.
Losses from the business widened over the year, with the retailer attributing the increased costs to the integration of its two dedicated fresh food suppliers – 2 Sisters and Wild Rocket Foods combined with exchange rate movements.
For the year, Tesco’s trading losses in the US widened by 9.7% to GBP186m, despite sales growing 38.1% to GBP502m. The retailer said that it expects losses to reduce sharply as “strong growth in like-for-like sales continues”. It now expects to break-even once it reaches 300 trading stores, down from its initially forecast 400, with plans to open some 50 outlets in the current year.
Shares in the retailer were down 0.84% to 396.65p a share at 09:23 BST.
Click here for the retailer’s full earnings statement and check back later for further insight into Tesco’s results.
