Tesco reported its first decline in annual profits in two decades Wednesday, reflecting the costs of a turnaround plan.
The British supermarket posted an underlying pre-tax profit of £3.5bn in the year to February 23rd 2013, a 10.7% fall from the £3.92bn the previous year, and in line with the forecast from Vuma Consensus.
Group profit before tax came to £1.96bn, a 51.5% decrease from the prior year's £4.0bn.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Chief Executive Philip Clarke said the drop in profits were a result of a £1.0bn restructuring plan which was launched after the supermarket issued a profit warning in January 2012.
Latest Videos FromMoneyWeek
"Our plan to 'Build a Better Tesco' is on track and I am pleased with the real progress in the UK," he said.
"We have already made substantial improvements to our customers' shopping experience, which are starting to be reflected in a better performance."
The plan included investments in more employees, refurbished stores, revamped food ranges and price initiatives in an effort to revive the group after losing market share to rivals like Sainsbury and Wal-Mart's Asda.
Tesco has also been walloped by the Eurozone crisis and was one of many UK retailers forced to remove beef products from its shelves after traces of horse meat were found.
It also suffered losses at its Fresh & Easy business and confirmed Wednesday it was exiting from the California-based venture. The announcement came as no surprise.
Tesco said the total impact of the US business to profit after tax was £1.2bn, including £169m trading losses and £1.0bn non-cash items - which predominantly includes the impairment of fixed assets and provisions for onerous leases.
A 1.4% increase in group revenues to £64.8bn did little to offset the costs of the write-off and reorganisation. Revenue was largely driven by online sales which grew 13% to £3.0bn.
The dividend remained unchanged at 10.13p, bringing the full-year dividend to 14.76.
"Our focus now is on disciplined and targeted investment in those markets with significant growth potential and the opportunity to deliver strong returns," Clarke concluded.
RD
