By
Reuters
Published
Apr 19, 2011
Reading time
2 minutes
Download
Download the article
Print
Text size

New Tesco boss says must do better in tough UK market

By
Reuters
Published
Apr 19, 2011

Apr 19 - New Tesco boss Phil Clarke said the world's third-biggest retailer needs to come up with new products and services and improve general merchandise ranges after falling short of its own expectations in a tough British market.

Tesco
Tesco's logo at a Tesco store in central London

The supermarket group said on Tuesday group underlying profit rose 12.3 percent to 3.8 billion pounds for the year ended February, in line with analysts' expectations thanks to a strong performance in Asia.

But profit in Britain, where Tesco accounts for almost 1 pound in every 7 pounds spent in shops, increased 3.8 percent, with sales at stores open at least a year falling 0.7 percent in the final quarter, excluding fuel and VAT sales tax.

"We didn't achieve our planned growth in the year and this was only partly attributable to the deterioration in the consumer environment during the second half," Clarke said of Britain, where Tesco makes over two-thirds of sales and profits.

"We can do better and we are taking action in key areas -- for example, to drive a faster rate of product innovation and to improve the sharpness of our communication to customers."

International retailers are increasingly relying on emerging markets for growth as shoppers in Europe and the United States struggle with austerity measures as governments cut their debts.

British store groups have been particularly hard hit by a rapid deficit reduction plan, triggering a wave of profit warnings as shoppers cut back spending on discretionary goods.

Tesco, with over 5,000 stores in 14 countries, said group sales rose 7.1 percent excluding VAT to 60.9 billion pounds, just short of analysts' average forecast of 61.7 billion pounds.

Profit in Asia jumped 17.5 percent at constant exchange rates to 570 million pounds, led by Tesco's second-biggest market, South Korea.

Losses in the United States widened 9.7 percent on the same basis to 186 million pounds. However, the group said it expected them to reduce sharply this financial year and it was on track for the business to break even in 2012-13, helped by opening new stores and the acquisition of two suppliers.

Tesco said return on capital employed, a key focus as investors look for a payback on years of heavy investment, rose to 12.9 percent from 12.1 percent the year before.
Capital spending for the current year would be 4 billion pounds, up slightly from 3.7 billion in the year just ended.

Shares in Tesco, which trails France's Carrefour and U.S. industry leader Wal-Mart by annual sales, have underperformed the STOXX Europe 600 retail index by 4 percent this year. They closed at 400 pence on Monday, valuing the group at 33 billion pounds.

By Mark Potter
(Editing by Paul Hoskins and Louise Heavens)

© Thomson Reuters 2024 All rights reserved.