Tesco's full-year results this week showed the supermarket chain slumping, with pre-tax losses of £6.4bn. These were the worst results in the company's 96-year history, and the worst ever recorded by a British retailer. One-off write-downs on the value of property accounted for around £4.7bn of this figure.
Tesco has lost millions of pounds of business to fast-growing discount retailers such as Aldi and Lidl. Like-for-like sales (excluding fuel) fell by 3.6%. Overall, trading profits fell by 58%to £1.39bn.
In addition, Tesco was hit with £416m of restructuring costs as it closed dozens of outlets and made thousands of staff redundant. The firm also felt the effects of a major accounting scandal that broke in 2014, under which it had overstated half-year profits by £263m.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
What the commentators said
By recognising all the problems at once including, in this case, the huge revaluation of Tesco's thousands of stores in the UK and overseas the management can start with a clean sheet and subsequent results will look a lot better. Yet Tesco still faces "significant hurdles" in its turnaround.
The fundamental problem is that "a shift in UK consumer behaviour put Tesco between a rock and a hard place", said Daniel Latev of research firm Euromonitor. As discount retailers and high-end chains have outperformed, Tesco has been left "with a shrinking consumer base in the middle market".
Still, at least the firm's problems have given CEO Dave Lewis "the perfect opportunity to implement bolder and more painful changes for the company".
But whatever Lewis does to transform the firm, these results marks the "official end of the Tesco era", said John Ibbotson of consultancy Retail Vision. "Even if Tesco does recover, it will never again be the force it once was. With this huge loss, the decadent retail dynasty of Tesco has come to an end."
-
HMRC slaps pensioners with record high surprise tax bills - do you owe the taxman money?More than a million people face surprise tax bills by HMRC, including thousands of pensioners, as triple lock pushes more retirees into taxable income brackets
-
Chase to launch its first ever credit card next monthChase bank has been piloting its first-ever credit card to select employees and customers since November, but will roll it out to all customers from June, MoneyWeek can reveal. While the bank has become popular for current and savings accounts, will its credit offering be just as favoured?
-
How to profit from rising food prices: which stocks should you invest in?Tips Food prices are rising – we look at the stocks to avoid and the one to invest in this sector.
-
Tesco looks well-placed to ride out the cost of living crisis – investors take noteAnalysis Surging inflation is bad news for retailers. But supermarket giant Tesco looks better placed to cope than most, says Rupert Hargreaves.
-
Tesco sells its retail subsidiary in Thailand and Malaysia for £8bnNews Tesco has agreed to sell its southeast Asian operations to Thai conglomerate Charoen Pokphand for £8.2bn in cash.
-
Tesco should keep its Asian assetsOpinion The £7bn that Tesco could get for its Tesco Lotus business in Asia looks enticing. But holding on to it would be smarter, says Matthew Lynn.
-
Share tips of the weekFeatures MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
-
Tesco wields the axeFeatures Britain’s biggest supermarket is cutting back on staff and fresh food. Will the move prove counterproductive? Matthew Partridge reports.
-
If you'd invested in: Tesco and Associated British FoodsFeatures Tesco has seen its market value rise almost 50% in a year, while AB Foods has seen shares slide despite a rise in profits.
-
What's behind Tesco’s alliance with Carrefour?Features Tesco is clubbing together with French rival Carrefour to bulk buy own-label goods in an effort to cut costs. Will it succeed? Ben Judge reports.
