Tesco reports £3.7bn profits, but UK can "do better"

For the year to February 26, Tesco reported group sales up 8.1% to £67.6bn, and a 12.3% rise in underlying pre-tax profit to £3.8bn.

In the UK, like-for-likes for the year excluding petrol and VAT were flat, with a fall of 0.1% in the second half, comprising 0.5% up in the third quarter, and down 0.7% in the fourth.

UK total sales were up 5.5% to £44.57bn and trading profit up 3.8% to £2.5bn.

The retailer said in the UK it “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”. It added: “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.”

New chief executive Phil Clarke said he has set out some immediate objectives for Tesco. Firstly, to keep the UK strong and growing, second to be outstanding internationally, not just successful. Thirdly, to become a multichannel retailer wherever we trade, and fourthly, to develop the potential of retailing services. Fifth, to apply group skill and scale to give even more value and increase competitive advantage to its business, and lastly, to deliver higher return on capital employed for shareholders.

In Asia, full year like-for-likes were up 2.3%. Trading profit was up 29.5% to £570m and the retailer said all countries except Japan and China made strong progress on profitability.

In Europe, trading profit is up 11.2% to £527m.

In the US, losses at Fresh & Easy increased in the year. This did not meet Tesco’s guidance issued at the beginning of the year, but it said it was a consequence of initial costs of integrating its acquisitions of two fresh food suppliers, and exchange rate movements.

It expects losses to reduce sharply in the current year as it said strong growth in like-for-like sales continues and improved store operating ratios start to deliver. Despite the higher losses, it said it still expects to break even towards the end of the 2012/13 financial year.

In general merchandise, Tesco said the business continued to grow, despite weak demand in some important markets such as the UK.

In the UK, general merchandise, clothing and electricals sales grew by 0.4% to £5.3bn.

Clarke said: “I am pleased with our strong overall performance in the face of some challenging conditions and we are well-positioned, with multiple opportunities to deliver long-term growth and rising returns.

“We have equipped the business for global growth with new management structures and teams-including an experienced UK board, which is bringing more focus and energy to our largest business. Asia and Europe made excellent progress contributing nearly 70% of our profit growth in the year. The momentum in the USA is building but still has some way to go.”