UK supermarket giant Tesco has reported profit for the first half of the year down by over 11% from the year ago period – the first profit fall it has seen for over 25 years.
Analysts attributed the loss to Tesco’s spending on its upgrade program.
Sales were up 3.2% at constant rates, however. Unusually, when petrol sales were factored out, the increase was 3.7%. Like for like sales grew in the second quarter.
By comparison, chief rival Sainsbury saw first half sales up by 4.1% excluding fuel.
The company was upbeat about its achievements. 60 new smaller-format Express stores opened during the period, and the company’s online business grew by 11%. It launched tesco.com in Poland and Slovakia, with Thailand and Malaysia launching soon.
Losses in the USA were reduced, and Tesco agreed an exit strategy from Japan with Aeon.
Tesco said that its £1 billion investment program, aimed at improving the customer shopping experience, was on schedule. 8,000 additional staff have been hired, and over 230 stores were refreshed in the first half.
“We continue to act decisively to tackle challenges and seize opportunities across the Group,” said Philip Clarke, chief executive. “ In April, I set out our plans to 'Build a Better Tesco' in the UK. We have been hard at work and I am encouraged by our customers’ initial responses to the changes we have made – but there is much more to be done. I am pleased that the team is in place, highly focused and energised, and I want to thank them for everything they have done.”
“The external environment continues to present challenges all over the world, he continued. “Whilst our businesses in Asia and Europe have continued to do a great job for customers, our financial performance there reflects the tough economic backdrop and particularly the regulatory changes in South Korea. That we have gained or held market share in the majority of markets is a testimony to the skill of our teams across the Group.”
“We have made some important strategic changes which have fundamentally altered our approach to capital allocation,” concluded Clarke. “First, significantly reducing space growth in the UK and focusing on improving the performance of our existing stores – and second, investing in online to enable Tesco to take a leadership role in the digital revolution: playing our part in shaping the future of retailing. It is in serving the changing needs of customers, as Tesco has done over many years, that we will create more value for shareholders."