Don’t write Tesco off just yet

published 18 April 2014

Supermarket giant Tesco continues to struggle. Investors had expected its results to be downbeat and they didn't disappoint. The company's full-year pre-tax profits fell by 7.7% to just over £3bn. Despite investing a lot of time and energy in trying to improve the fortunes of its UK business, trading profits in Britain fell by 3.6%.

The keenly watched like-for-like sales figures continued to deteriorate, falling by 3% during the last three months of the year as former Tesco customers did more of their shopping at cheaper rivals Aldi and Lidl. The company remains by far the biggest UK supermarket with a 28.6% share of the market, but that's down from 29.7% a year ago.

Meanwhile, trading in Europe was truly awful, with profits falling by a third. And weak economies and tough competition mean that things are unlikely to get better soon.This has led to Tesco writing down the value of some of its European investments.

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The one crumb of comfort for shareholders was that the dividend was held at 14.76p per share. But the payout is unlikely to increase until profits improve and Tesco is saying that times will be tough for a good while yet.

What the commentators said

Chief executive Philip Clarke has said that he has no plans to step down, despite calls for his head from some investors, said Graham Ruddick in The Daily Telegraph. And it would be "foolish to write them off".

Tesco has "more stores and a higher margin than its rivals. Those are powerful weapons in the battle for grocery shoppers in the UK" as long as Clarke can find a way to unleash them.

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.