Tesco profits: Supermarket giant announces £6.4bn loss

 
Fall in profits: Tesco is to announce its results today which are expected to show vast losses

The crisis that has engulfed Tesco reached a new peak today with “catastrophic” losses of £6.4 billion that are by far the biggest in British high street history.

The sheer scale of the plunge into the red far exceeded the “worst case scenario” forecasts of City analysts, and led one to declare it was “the official end” of Tesco’s era of supermarket dominance.

Chief executive Dave Lewis, who was brought in last September in an attempt to reverse the slide, said the vast annual losses were the culmination of “a very difficult year.”

It was marked by a loss of grocery market share to rivals such as Aldi and Lidl, falling sales, and an accounting scandal.

Work to do: Today's results outline the scale of the challenge facing chief executive Dave Lewis to turn the supermarket around

But despite the calamity of Tesco’s bleakest financial year since it was founded in 1919, Mr Lewis insisted there were “early encouraging signs” of a turnaround.

He told the Standard: “I look at the history of Tesco in order to try and learn some lessons for the future but clearly it’s a very significant day.

“I completely get why everyone will talk about the statutory loss but over the last six or seven months, step by step, brick by brick we’ve shown the fundamentals of the business are very strong. More people are coming, transactions are improving and volume has improved for the first time in four years.”

However, analysts said there was still “a mountain to climb” before Tesco — once so powerful it was dubbed “Tescopoly” by critics — could claim to be back on track.

Paul Thomas, of the retail consultants Retail Remedy, said: “Dave Lewis can only hope that Tesco’s night is darkest just before dawn. Because results don’t get darker than this.”

Action being taken by Mr Lewis includes the closure of 43 stores, halting plans to build 49 new ones, and shutting Tesco’s Cheshunt headquarters.

Prices have been slashed on “essential products” such as bread and butter and more “customer-facing” staff being placed in stores in a new “back to basics” campaign. The dividend to shareholders has also been axed to preserve cash. The results for the year to the end of February show Tesco’s underlying profits were down by more than two- thirds to £961 million before huge write-offs of £7 billion, mostly related to the chain’s property portfolio. Tesco is also having to put £270 million a year into its pension fund to close a £2.8 billion deficit.

The loss is believed to be the sixth biggest ever recorded by a British company and by far the largest by a retailer.

In a statement to shareholders Tesco admitted it had not been “competitive enough in the face of challenging market trading conditions.”

Like-for-like sales in the UK, where Tesco has 2,680 stores, were down 3.6 per cent over the year although the rate of fall eased to 1 per cent in the last quarter.

Tesco’s former chief executive Philip Clarke was ousted last July following a string of profit warnings.

This was swiftly followed by the extraordinary revelations about a £263 million black hole in the company’s accounts, leading to the suspension of nine executives and a Serious Fraud Office investigation.

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