Tesco Still In The Cash Despite Decline In Sales: Reports £3.3bn Profit

by Benson Agoha

Tesco released its preliminary results for 2013/2014 and Chief Executive Philip Clarke says Tesco's results must be seen in the context of what is happening in the overall retail market.

 

* Philip Clarke: Refreshing Tesco for a better future.

 

“We are transforming Tesco through a relentless focus on providing the most compelling offer for our customers. Our results today reflect the challenges we face in a trading environment which is changing more rapidly than ever before. We are determined to lead the industry in this period of change," the CEO said.

 

In a video message, he provided more insight into what Tesco is doing, saying two things are happening in the market, including the fact that customers are still feeling the impact of economic situation as they look for ways to save, having been hit by the recession.

 

And the effects the internet is having on shoppers, to which tesco has to respond.

 

The result show that Tesco made a trading profit of £3.3bn. The year-on-year decline reflecting economic challenges in UK and Europe.

 

But the result showed a strong UK growth in online grocery which rose 11% and Tesco's Express LFL which rose 1.1%.

 

The UK sales (excluding petrol) rose 0.8% but with lower net new space contribution as planned.

 

 While UK `Like-For-Like' inc. VAT, but exc. petrol was 1.3%, held back, he said, by work on the transformation of general merchandise and a weaker and increasingly competitive grocery market in the second half.

 

Shareholders were not left out as Tesco declared a final dividend to be maintained at 10.13p. This means a total dividend for the year of 14.76p.

 

Against recent claims that Tesco does not reduce prices, he said they habe been reducing price since February and that the reductions are targeting products that matter most to customers, those that matter on their plate and on their tables everyday, adding that volumes are increasing and customers are responding to the changes.

 

But he said it is not just about price reduction, but also about the quality and range of the service, and for this reason, Tesco is moving to improve about 600 stores by refreshing them. It has already refreshed nearly 300 stores in the UK.

 

He said Tesco is refreshing and that this will be done over the next three years, using the insight gained from Club cards, and that they are aware of the effect such changes have on customers when they see their stores reborne.

 

He said for the past two years, Tesco has been reevaluating their operations internationally and even importantly, aready has market leadership or close to it, in Asian countries including  Korea, Malaysia and Thailand.

"We have completed our exit from the U.S. and established partnerships with CRE in China and Tata in India which provide continued access to two of the world’s most exciting markets, consistent with a sustainable level of future investment,” he said.

 

He said Tesco is also pursuing a multichannel focusing strategy and has launched grocery home shopping in five countries and that it aims to maintain a consistent approach to capital discipline, returns and cash.

 

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