UK: Tesco remains under pressure as FY profits slump
- FY trading profit down 6%
- UK like-for-like sales flat
- Clothing online sales strong
Tesco said clothing online continued to perform strongly last year
UK retail giant Tesco has revealed its second consecutive annual drop in profits as the beleaguered behemoth struggles with sales at home and abroad.
Group trading profit in the 12 months ended 22 February dropped 6% to GBP3.31bn (US$5.55bn). In the UK, where Tesco is refreshing its stores and turning its focus to a multi-channel offering, earnings were down 3.6% to GBP2.19bn.
In Europe, group trading profit fell 28% to GBP238m as sales in the Czech Republic, Hungary, Poland, Slovakia and Turkey, and Ireland, all slumped. Earnings were also down 5.6% in Asia to GBP692m.
Sales meanwhile were relatively flat, edging up just 0.3% to GBP70.89bn. Like-for-like sales in the UK dropped 1.3%.
"Our results today reflect the challenges we face in a trading environment which is changing more rapidly than ever before," said chief executive Philip Clarke.
Nonetheless, Tesco, which announced plans this week to return to the US with a chain of F&F clothing franchise stores, said clothing online continues to perform strongly, with sales growth of nearly 60% in 2013/14.
The group's shares were up 4.09% to 298.02 pence at 08:49 GMT today, however, both Tesco's share price and market share have been struggling at near-decade lows.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "Whether today marks the nadir of Tesco's fortunes remains to be seen, as the beleaguered behemoth remains under pressure.
"Tesco remains the UK's largest supermarket by some considerable margin, the actual profit number is significant and, from an investment perspective, the dividend yield of 5% is attractive. However, these factors have not been enough to arrest a share price decline of 26% over the last year, during which time the wider FTSE100 has added 4%."
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