Troubles mount in Tesco's key international markets

Tesco revealed the extent 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. Tesco's shares fell 8.75p to 327.95p.

The group's pre-tax profits tumbled 11.6 per cent to £1.7bn over the half-year to 25 August – the first fall for 18 years. This largely reflects the grocer's £1bn UK investment programme, which helped it to deliver a 0.1 per cent rise in UK sales over the 13 weeks to 25 August.

However, its chief executive Philip Clarke faces big challenges overseas in 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 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 is also still struggling in the US, where its Fresh & Easy chain posted a half-year loss of £74m. The group stuck to its target of getting the chain breaking even by February 2014.