22nd April 2015
Tesco has posted a pre-tax loss of £6.4bn in its worst ever results.
Last year the supermarket made a pre-tax profit of £2.26bn. Not only were its results for the year to February the worst in the company’s own record, but they also marked the largest ever loss by any UK retailer.
A drop in the value of its property portfolio accounted for £4.7bn of the loss, as fewer customers have been visiting its out-of-town branches. Tesco says it is closing 43 of its stores.
The company has been mired by scandal as it was revealed earlier this year that it had overstated its profit forecast by £263m, which is now being investigated by the Serious Fraud Office.
However, Tesco’s share price rose by more than 1% in early trading to 237.8p.
Chief executive Dave Lewis said it had been a very difficult year for the company.
Lewis said: “The results we have published today reflect a deterioration in the market and, more significantly, an erosion of our competitiveness over recent years.
“We have faced into this reality, sought to draw a line under the past and begun to rebuild, and already we are beginning to see early encouraging signs from what we’ve done so far.”
Tesco is also having to pay £270m a year to help resolve its £3.89bn pension deficit.
Paul Thomas of the retail consultants Retail Remedy, says: “Dave Lewis can only hope that Tesco’s night is darkest just before dawn. Because results don’t get darker than this. A £6.4bn loss isn’t just one of the biggest losses in British corporate history, it’s a black hole that risks consuming a once all-powerful brand.
“To say Tesco’s CEO has a mountain to climb to reverse its decline is to underplay the scale of the task. At times the combative Mr Lewis must feel like an ant scaling the Himalayas. But at least progress has been made. Gone are the complacency, the hubris and the corporate jets.
He adds: “The brand has retrenched and jettisoned many of the peripheral businesses that were dragging it down. A back to basics approach in its stores has seen it introduce simple and effective offers that keep shoppers coming back. The closure of poorly performing stores – and the addition of more staff at those that remain – has improved service levels.
“Such improvements will give the fallen titan back some momentum, but the constant price war will hamper profit growth.
“Ultimately Lewis’ strategy will be judged by its success at making Tesco stores appealing to shop in again. If the brand can repair its reputation for good service, great choice and strong offers, it will have at least stopped the rot. But the journey will be long and hard.”