New Tesco boss blames economy for worst UK results in 20 years

Philip Clarke, the chief executive of Tesco, has blamed a further deterioration in consumer confidence and the "extraordinary" impact of higher petrol prices on expenditure for a dire set of UK sales, although group profits surged in the first half.

Mr Clarke also hit back against criticism of the £500m-plus investment it made last month in lowering prices, saying "it is not smoke and there are no mirrors". Instead, Mr Clarke said the "real reduction in prices" would contribute to Tesco posting "broadly flat" underlying UK profits in the second half of the year.

Strong growth overseas, notably in Thailand and China – as well as a rapid store opening programme in the UK – helped the group increase its pre-tax profits by 6.2 per cent to £1.92bn for the 26 weeks to 27 August. The supermarket giant, which has operations in 14 countries, posted total sales up by 8.8 per cent to £35.53bn.

However, in the UK – which accounts for more than 70 per cent of group trading profit – Tesco's underlying sales, excluding fuel and petrol, fell by 0.5 per cent over the half. Its UK like-for-like sales tumbled by 0.9 per cent in the final three months – Tesco's weakest performance for about two decades.

In particular, the grocer's non-food operation, which fell by 4.8 per cent in the first half, is being hit by the squeeze on discretionary spending, as well as by higher petrol prices that have led to fewer trips to its out-of-town hypermarkets.

Mr Clarke said that, even so, Tesco's UK customers had spent an "extraordinary" £750m more on petrol over the half because of the higher prices, and this had hit disposable incomes hard.

Tesco's chief executive was also downbeat on consumer sentiment. Mr Clarke said: "Confidence is lower than it was at the beginning [of the half]... there is not much good news out there."

To turn around its UK performance, Tesco launched a £500m offensive last month to reduce prices on more than 3,000 items in its stores. It is also investing in customer service and product across its stores.

Jonathan Pritchard, a retail analyst at Oriel Securities, said: "The Big Price Drop gets all the headlines and analytical attention but we're more impressed by the activity regarding quality in fresh, availability and the improvements in staff densities." Tesco has continued to expand rapidly in the UK, adding more than 700,000 square feet of space in the first half. The grocer increased its total UK sales, including petrol, by 7.1 per cent to £23.43bn. New stores and extensions accounted for more than half of this increment.

Mr Clarke struck a bullish note on Tesco's Fresh & Easy convenience store business in the US, which it has vowed to make profitable by 2012-13. He said the reduction in Fresh & Easy's losses – down 23.2 per cent to £73m – was "an important milestone", achieved through continuing sales growth and better margins from its acquisition of a supplier in the US.

Mr Clarke said: "I am even more confident that we are on track to break even than I was in April."

However, Tesco Bank suffered a 65.9 per cent fall in profits to £44m,largely because it increased its provision by a further £57m for alleged mis-selling of payment protection insurance relating to its joint venture with Royal Bank of Scotland before 2008. The bank has also suffered IT setbacks.

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
Friends is celebrating its 20th anniversary this year
tvSeries celebrates 20th anniversary
News
news
Life and Style
Jack Cooksey goes for the grand unveiling - moments before dropping his new iPhone 6 on the floor
iphone launch
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Life and Style
life

News
ScienceGallery: Otherwise known as 'the best damn photos of space you'll see till 2015'
Life and Style
fashion

Bomber jacket worn by Mary Berry sells out within an hour

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Audit Manager Central Functions

To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...

Credit Risk Audit Manager

Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week