UK: Tesco H1 profit falls but clothing sales grow
- Group H1 pre-tax profit drops 11.6% to GBP1.66bn
- UK trading profit down 12.4% to GBP1.12bn
- UK lLike-for-like sales down 0.7%
A GBP1bn (US$1.6bn) investment plan launched earlier this year to help turn around its domestic business has contributed to a decline in first-half profit at Tesco Plc, the UK's largest retailer.
A slowdown in sales in the UK also weighed on the retail giant's earnings, but it said clothing returned to growth - particularly in the second quarter - thanks to "further investment in both price and quality."
The supermarket giant today (3 October) booked an 11.6% drop in pre-tax profit to GBP1.66bn in the six months to 25 August.
In the UK, trading profit was down 12.4% to GBP1.12bn, with like-for-like sales down 0.7%. But UK sales edged up 2.2% on a total basis.
Group sales, however, edged up 1.6% to GBP32.31bn in the period, but like-for-like sales, excluding petrol, were down 0.6%.
Group operating profit slid 6.6% to GBP1.81bn, while international profits were down 17.1% to GBP378m. Tesco blamed the Eurozone crisis for sapping consumer confidence, while in Asia there is weakening consumer demand in China and its largest market, Korea, has been impacted by new opening hour restrictions.
The retailer said there were signs its UK recovery plan plan was working, with improvements in UK sales performance, including like-for-like sales growth in second quarter.
It also said clothing saw sales growth of 5.3% at constant exchange rates during the half-year, following the previous year's strong growth of 11%. The F&F clothing business now operates as a single unit across the UK, Ireland and Central Europe, which is enabling improvements in stock management, range and margin.
"I am encouraged by our customers' initial responses to the changes we have made - but there is much more to be done," Clarke said.
He added that trading conditions "continued to be tough" across the whole of the UK market in the first half, with consumer confidence remaining at "very low levels".
Looking ahead, Clarke said: "We are planning on the basis that the global economic environment continues to be very challenging, with customers facing real financial pressures and our businesses bearing the burden of higher costs."
Neil Saunders, managing director of Conlumino, believes "the underlying issue relates, primarily, to the retail proposition, which remains below par. Tesco's store environments, its service standards and its range are all in need of improvement.
He adds: "One of the worrying signs from this update is the extent to which some parts of the international business have deteriorated: growth in Asia has slowed substantially while European sales have declined. While there are understandable reasons for this, it does suggest that Tesco is now a company fighting battles on many fronts."
Bryan Roberts, Kantar Retail's director of retail insights, suggests Tesco's numbers "tell us that its under-performance in the UK may well have bottomed out.
"The last couple of years have shown us that even the giants can falter when they take their eye off the shopper; years of underinvestment in stores and people are now being reversed by Philip Clarke and these early signs suggest that his radical investment programme is paying off.
"In the fullness of time, Tesco's recent problems are likely to be seen as an unfortunate blip...Competitors should be fearing the worst as 2013 is likely to see a resurgent Tesco looking to make up the ground it has lost."
Vietnam's leading textile and garment manufacturer, Thanh Cong textile Garment Investment Trading JSC (TCM), has begun construction of new knitting plant in a bid to supply material for its own produc...
UK retail giant Tesco has revealed plans to reshuffle its distribution network, putting up to 2,000 jobs at risk....
UK fashion retailer Monsoon Accessorize has appointed John Browett as its new group chief executive officer....
The following is a round-up of apparel and footwear news from the world's local media. just-style has not checked these stories so cannot guarantee their accuracy. ...
Bangladesh's woven garment exports grew by nearly 12% in the first half of the current fiscal year, helped by a shift in orders from China, exporters said....
- Supply chain takeaways from Sourcing at MAGIC
- Why voters don’t want more global supply chains
- Cotton supply chain transparency an ongoing issue
- Denim and athleisure top picks for back-to-school
- No simple way to be sustainable, says SAC CEO
- H&M takes action over Myanmar child labour breach
- Vietnam garment industry calls for strategy update
- US Q2 in brief - Burlington Stores, Destination XL
- Zara USA faces US$5m deceptive pricing lawsuit
- EU clothing imports from China continue to plunge
- Too Many Standards
- Southeast Asia strategic sourcing review – a focus on Cambodia, Vietnam and Myanmar
- Under Armour, Inc. (UA) - Financial and Strategic SWOT Analysis Review
- Central America strategic sourcing review - a focus on Guatemala, El Salvador and Honduras
- Myanmar's Garment Sector in 2015 - now with updated members' directory