• FY trading profit rises 7.8%; sales up 8.1%
  • UK general merchandise sales up 0.4% to GBP5.3bn
  • Improving clothing performance "is a priority" 

Philip Clarke, the new CEO of Tesco, today (19 April) said the retailer "can do better" in the UK after the country's largest retailer posted flat annual sales in its domestic market - adding that improving the performance of its clothing business here "is a priority."

Clarke said Tesco needed to drive a faster rate of product innovation and to "improve the sharpness" of its communication to customers.

His comments came as the retailer recorded a 7.8% increase in group trading profit to GBP3.7bn (US$6.01bn) for the year ended 26 February. Group sales at the world's third-largest retailer rose 8.1% to reach GBP67.6bn.

In the UK, meanwhile, trading profit was up 3.8% at GBP25bn, while sales grew 5.5% to GBP44.6bn. However, like-for-like sales in the UK, excluding VAT and petrol, were flat for the year - and fell 0.1% in the second half of Tesco's fiscal year.

Overall sales of general merchandise, clothing and electricals rose 8.8% during the year to GBP10.3bn, despite cautious consumer spending in the UK where sales edged up just 0.4% to GBP5.3bn.

Like-for-like sales across the category fell 3.3% during the second half, faster than the 0.3% decline seen in the first half.

"Improving the performance of these categories in the UK is a priority," the retailer said, adding: "We have strengthened the teams and they are working on improvements to ranging, merchandising, pricing and promotions."

Clarke said Tesco's Asian and European operations contributed nearly 70% of its profit growth in the year.

Trading profit in Asia was up 17.5% to GBP570m, while sales grew 9.7% to GBP11.02bn. Tesco said that the increases were driven by improving like-for-like sales growth, as well as a "useful contribution from new stores" and further benefits from its acquisition of Homever in South Korea in 2008.

In Asia, softline sales growth was "high-single digit," Tesco said, despite unseasonably warm weather during the third quarter in China and Korea which affected clothing performance.

In Europe, the retailer said it booked "record results" and "the strongest growth in sales, profits and margins for several years", with trading profit up 13.1% to GBP527m. Sales grew 7.4% to GBP10.5bn.

Economic recovery here also helped lift clothing sales by 9% in Central Europe, where the retailer has expanded its line-up from the F&F line to include the F&F Blue and F&F Basics sub-brands.

For the year, Tesco's trading losses in the US widened by 9.7% to GBP186m, despite sales growing 38.1% to GBP502m. The retailer said that it expects losses to reduce sharply as "strong growth in like-for-like sales continues".

Shares in the retailer were down 0.84% to 396.65p a share at 09:23 BST.

Click here for the retailer's full earnings statement and check back later for further insight into Tesco's results.