Tesco 'on road' to recovery, says CEO Philip Clarke

 

Tesco insisted its UK business was on the road to recovery today despite the supermarket giant's first drop in profits in two decades.

After six consecutive quarters of falling like-for-like sales, the UK's biggest supermarket chain eked 0.1% growth in the second quarter of its financial year as its £1 billion turnaround revamp launched.

But the significant investment - spent on a range of initiatives from 8,000 extra staff to launching its Everyday Value range - took a chunk out of its UK profits, which slid 12% to £1.1 billion in the six months to August 25.

And to compound its woes, Tesco's international arm, once the driving force behind the group, saw profits fall 17% to £378 million as shopping restrictions in South Korea and the eurozone crisis hit Asia and Europe respectively.

As the group revealed a 12% drop in overall group pre-tax profits to £1.66 billion, chief executive Philip Clarke said: "I wouldn't say we've turned a corner, but we're definitely on the road."

An increased use of targeted offers, using the data collected through its Clubcard promotion, and strong growth in its online grocery business were behind the improved like-for-like performance in the UK, Mr Clarke said.

He updated on the progress made with its turnaround plan, unveiled in April shortly after the group issued its first profit warning in 20 years, although added there was "much more that can be done".

More than 230 stores have undergone "refresh work", ranging from signage and colour-scheme changes to comprehensive refits including more use of wood, warmer colours and improved lighting.

The new Everyday Value range, which replaced Tesco Value, covers 550 items, with 80% of customers purchasing the products, while the group is part way through revamping its core Tesco label range of more than 8,000 products.

The website saw sales up 11% compared to the same period last year, while more than 70,000 customers have signed up to its delivery saver subscription service - offering customers the option to pay for delivery charges up front at a discount.

But shares fell 1% as analysts warned the strategy was long-term and the UK turnaround plans would continue to heap pressure on the supermarket's profit margins.

Philip Dorgan, analyst at brokers Panmure Gordon, said the UK recovery was "on track" but would take time.

He said: "Getting the UK back onto a recovery path is all about doing 1,000 things 1% better, rather than having a wonderful store format that will save the company.

"Therefore, there are changes to staff numbers, staff hours, own label ranges, store layout and signage, the localisation of ranges, personalisation of offers through Clubcard and marketing strategy, all of which should feed through to a proposition that is in line with customers' needs and requirements."

The group said slow sales in Poland, the Czech Republic, Hungary and South Korea were behind the slide in international profits and sales.

Sunday trading restrictions in Korea hit the business there hard, while high tax in Hungary and the Czech Republic were partly to blame for the European business profile.

And its troubled US chain Fresh & Easy continued to be loss-making, losing £74 million in the period, a 1.4% improvement on last year.

PA

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
News
Andy Davidhazy at the beginning (left) and end (right) of his hike
video
News
Taylor Swift is applying to trademark song lyrics from 1989
people
Voices
The popularity of TV shows such as The Liver Birds encouraged Liverpudlians to exaggerate their Scouse accent
voicesWe exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
Life and Style
Parker says: 'I once had a taster use the phrase 'smells like the sex glands of a lemming'. Who in the world can relate to that?'
food + drinkRobert Parker's 100-point scale is a benchmark of achievement for wine-makers everywhere
News
i100
  • Get to the point
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

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

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

Day In a Page

Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing