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| Tesco profits down as it takes £1bn hit to quit US | |
| (35 minutes later) | |
| Tesco, Britain's biggest retailer, confirmed it will exit its loss-making business in the US, taking a £1bn writeoff that knocked its full-year profit down for the first time in two decades. | |
| The group also wrote down the value of its property in Britain, by £804m, and took a writedown on its businesses in Poland, Czech Republic and Turkey of half a billion pounds. | The group also wrote down the value of its property in Britain, by £804m, 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 had slowed. | 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 had slowed. |
| "The announcements made today are natural consequences of the strategic changes we first began over a year ago and which conclude today," the chief executive, Philip Clarke, said. "I've been working for Tesco for nearly 40 years and I can tell you this – it already looks, feels and acts like a different and a better business." | |
| The world's third-largest stores group said on Wednesday it made a pretax profit of £1.96bn in the year to 13 February, down 51.5%. | The world's third-largest stores group said on Wednesday it made a pretax profit of £1.96bn in the year to 13 February, down 51.5%. |
| It also reported a 14.5% fall in underlying full-year profit, largely reflecting the cost of a turnaround plan for the UK market, launched after a shock profit warning in January last year. | It also reported a 14.5% fall in underlying full-year profit, largely reflecting the cost of a turnaround plan for the UK 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% – a slowdown from growth of 1.8% in the six weeks to 5 January. | 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% – a slowdown from growth of 1.8% in the six weeks to 5 January. |
| That was, however, at the top end of a range of forecasts of 0-0.5% and the strongest quarterly growth for three years, the company said. | |
| Tesco's £1bn pound fightback plan for Britain focused on more staff, refurbished stores, revamped food ranges and price initiatives – all aimed at reversing years of under-investment and halting a loss of market share to rivals like Sainsbury's and Asda. | Tesco's £1bn pound fightback plan for Britain focused on more staff, refurbished stores, revamped food ranges and price initiatives – all aimed at reversing years of under-investment and halting a loss of market share to rivals like Sainsbury's and Asda. |
| As it reviewed the British business, the company also took a writedown of £804m on its property investments. The writedown on the operations in Poland, Czech Republic and Turkey hit half a billion pounds. | |
| Tesco also said it had increased its provision to cover the possible mis-selling of insurance products at its Tesco Bank to £115m. | Tesco also said it had increased its provision to cover the possible mis-selling of insurance products at its Tesco Bank to £115m. |
| Earnings have also been hit by the impact of the eurozone debt crisis on eastern European markets, restrictions on store opening times in South Korea, and losses at the US business Fresh & Easy. It has decided to exit the US altogether. | Earnings have also been hit by the impact of the eurozone debt crisis on eastern European markets, restrictions on store opening times in South Korea, and losses at the US business Fresh & Easy. It has decided to exit the US altogether. |
| Fresh & Easy, which trades from 199 stores and employs about 5,000 people, has absorbed more than £1bn of capital since its 2007 launch when Tesco was run by Clarke's predecessor, Sir 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. | |
| "Tesco's ignominious exit from the US will grab all the headlines but the truth is that even without the Fresh & Easy debacle the supermarket would probably still have seen its profits fall for the first time in 20 years," said Phil Dorrell, director of retail consultants Retail Remedy. "Slowly, things are getting back on track in the UK. The question now is can Tesco sustain its newfound momentum and increase profits in a still challenging global climate? 2013 is shaping up to be a critical year." | |
| Clarke put the venture, which contributes just 1% of group turnover, under review in December, saying an exit was likely. | Clarke put the venture, which contributes just 1% of group turnover, under review in December, saying an exit was likely. |
| Tesco's chief financial officer, Laurie McIlwee, said there was "a lot of interest" in Fresh & Easy, with possible suitors for the whole business or parcels of stores. | Tesco's chief financial officer, Laurie McIlwee, said there was "a lot of interest" in Fresh & Easy, with possible suitors for the whole business or parcels of stores. |
| "What we're most interested in is those buyers that are interested in buying the complete business that we have in the US," he said, pointing out that a complete sale would remove redundancy and onerous leasehold issues. | "What we're most interested in is those buyers that are interested in buying the complete business that we have in the US," he said, pointing out that a complete sale would remove redundancy and onerous leasehold issues. |
| He said Tesco would not conclude the process for at least another three months. | He said Tesco would not conclude the process for at least another three months. |
| The group made an underlying pretax profit of £3.55bn. That compares with analysts' consensus forecast of £3.5bn, according to a company poll, and with £3.92bn made in 2011/12. |