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Business News

Tesco chief vows to stay on despite further fall in profits

Tesco's chief executive issued a defiant "I'm not going anywhere" message to shareholders yesterday after the supermarket giant reported its second year of falling profits.

Philip Clarke, who took over as chief executive from Sir Terry Leahy three years ago, has come under increasing pressure as the UK's largest retailer has been squeezed between cut-price Aldi and Lidl and more upmarket Waitrose.

Asked if he still had the support of shareholders, he said: "It's not for me to talk about that. It's my job to run Tesco for its customers. It's what I love. I'm not going anywhere and I am going to see this through."

The long-standing finance director Laurie McIlwee resigned earlier this month, leaving Mr Clarke the only executive director on the board, but yesterday he denied it was because he disagreed with Mr Clarke's strategies.

Tesco's trading profit fell by 6 per cent to £3.3bn on sales up just 0.3 per cent at £71bn in the year to end-March. That was slightly better than the average City analyst forecast and the shares rose 2 per cent, or 7.5p, to 293.8p.

Mr Clarke went on the offensive, promising there would be more price cuts "over the weeks and months to come". But having committed £200m to price cutting in February he refused to be drawn on how much more Tesco would spend.

He said: "That £200m was the start. I intend to keep my flexibility and won't be drawn on a number for further cuts because that is commercially sensitive."

Its rival Morrisons has promised £1bn of price cuts over the next three years.

Mr Clarke acknowledged the surge in popularity of the discounters Aldi and Lidl. He said: "They are formidable and have done a great job in the UK. They sell a very limited range at good prices. If you try to get lower than them on price they don't let you. I've learnt that we have got to be different."

Tesco took an £801m writedown largely on the value of its European stores, where trading profits fell by 28 per cent. It also had a £501m writedown on its Chinese venture, which together with the previous year's write-off on the failed US business takes the writedowns over two years to more than £2bn.

Mr Clarke refused to blame his predecessor, Sir Terry, for this, saying that he had been part of the decision-making process at the time. He said: "Markets change and I don't think we made a mistake."

He declined to comment on analysts' forecasts that profits will fall again this year. He said: "Competition has intensified and the transformation of the industry is accelerating. We have to deliver the most compelling offer to customers across all our channels."

Clive Black, retail analyst with Shore Capital, is calling for a board shake-up, but not Mr Clarke's head. He said: "With an executive board of one person, we assert that shareholders can only look to the non-executive directors as the source of responsibility for the group's current plight."