Problems mount overseas for Tesco as it posts first profit fall in nearly 20 years

 

Tesco revealed the scale of the fires burning across much of its international retail empire yesterday, as the grocery giant posted its first fall in profits for nearly 20 years.

The world's third-largest retailer gave the City hope that its £1bn turnaround plan for the UK could be working by posting a small return to growth in its UK underlying sales for the first time in six quarters.

But the group, which operates in 13 countries, posted a 17.1 per cent fall in international trading profits to £378m over the half-year to 25 August and gave a bleak update on its performance in South Korea, the US and Europe. While the UK accounts for more than 60 per cent of Tesco's sales and profits, the fall in half-year sales in more than half of the countries it operates overseas will concern investors.

This is because its international business has delivered what Tesco described as "spectacular" growth over recent years. Tesco's shares fell 8.75p to 327.95p.

The group's pre-tax profits tumbled by 11.6 per cent to £1.7bn over the half-year to 25 August – the first fall for 18 years. This decline largely reflects the grocer's £1bn UK investment programme, such as adding more than 8,000 new staff and refreshing 230 stores so far with new signage and warmer colours.

Philip Clarke, Tesco's chief executive, said he was "encouraged by our customers' initial response to the changes", which helped it to deliver a 0.1 per cent rise in UK underlying sales over the 13 weeks to 25 August.

This was a marked improvement on the 1.5 per cent decline the market leader posted in its first quarter, but left it trailing behind Sainsbury's.

However, Mr Clarke faces big challenges overseas in many countries, such as South Korea, which is its biggest market outside the UK.

Tesco said its profits would take a £100m hit from South Korea this year, following a decision by the country's government to ban Sunday trading for two weekends a month and restrict trading to between 8am and midnight on other days, which has stopped Tesco Homeplus's 24-hour trading.

Tesco Homeplus, which launched in 1999 and has more than 450 stores, saw a 6.6 per cent fall in underlying sales in its second quarter, and Mr Clarke was not hopeful of a swift reversal of the regulations by the South Korean government.

Tesco is also struggling to realise its American dream after its US chain, Fresh & Easy, sunk to another painful half-year loss of £74m. Mr Clarke maintained his target of Fresh & Easy breaking even by February 2014, but he is to tightly constrain its capital expenditure in America and scale back new store openings.

Tesco also has problems closer to home after a 27.8 per cent fall in trading profits to £171m in Europe over the half year.

Mr Clarke said the "chill winds of the eurozone crisis" had spread to countries such as Poland and Czech Republic.

News
people'It can last and it's terrifying'
News
people Emma Watson addresses celebrity nude photo leak
News
Katie Hopkins appearing on 'This Morning' after she purposefully put on 4 stone.
peopleKatie Hopkins breaks down in tears over weight gain challenge
Sport
Alexis Sanchez, Radamel Falcao, Diego Costa and Mario Balotelli
football
PROMOTED VIDEO
Sport
Danny Welbeck's Manchester United future is in doubt
footballGunners confirm signing from Manchester United
News
i100
Arts and Entertainment
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
News
ebooksAn unforgettable anthology of contemporary reportage
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
Arts and Entertainment
Hare’s a riddle: Kit Williams with the treasure linked to Masquerade
booksRiddling trilogy could net you $3m
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
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

Power & Gas Business Analyst / Subject Matter Expert - Contract

£600 - £800 per day: Harrington Starr: Power & Gas Business Analyst/Subject Ma...

Infrastructure Lead, (Trading, VCE, Converged, Hyper V)

£600 - £900 per day: Harrington Starr: Infrastructure Lead, (Trading infrastru...

Planning Manager (Training, Learning and Development) - London

£35000 - £38000 per annum + benefits: Ashdown Group: A highly successful, glob...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Day In a Page

'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering