Tesco's share price fell this morning as the UK's biggest retailer revealed it was struggling to show signs of an improvement a year after its profit black hole was discovered under new chief executive Dave Lewis.
The troubled supermarket's UK like-for-likes fell 1.1 per cent for the six months to August 31, while UK's group operating profit fell 69 per cent from £543m to £166m. International sales nudged up one per cent with growth in both Europe and Asia for the second quarter.
Group operating profit before exceptional items was down almost 55 per cent.
Group sales were down 1.9 per cent, but after last year's disastrous results, group statutory profit was up 63.9 per cent to £354m.
Group pre-tax profit before exceptional items fell 74.3 per cent to £158m.
All that means there will be no dividend paid out for this half.
Tesco's share price was down three per cent in early trading.
Why it's important
Tesco has been on a roller-coaster ride over the last year, but it does not appear to be getting off any time soon.
Under Lewis, the supermarket has started the process of making huge cost savings, and is on track to deliver £400m from its restructure. It is also making “significant progress” on its balance sheet, with the sale of Korean arm Homeplus and a move towarsd a defined contribution pension scheme in UK.
Lewis confirmed this morning that Tesco will retain its loyalty card business Dunhumby. It is thought this could be down to a lack of interest in the business.
But Tesco's core business is still under huge pressure from the budget supermarkets Aldi and Lidl who are driving the price wars – and making life difficult, not only for Tesco, but for the rest of the big four.
Of course there is still the elephant in the room - Tesco's £263m profit "overstatement", which is currently being investigated by the Serious Fraud Office.
Tesco's share price has been battered over the last year, and closed down more than two per cent yesterday ahead of today's results.
What Tesco said
Chief executive Dave Lewis said: "We have delivered an unprecedented level of change in our business over the last twelve months and it is working. The first half results show sustained improvement across a broad range of key indicators.
“In the UK, we continue to improve all aspects of our offer for customers, resulting in volume growth which is allowing us to create a virtuous circle of investment.
“Our transformation programme in Europe has accelerated growth and reduced operating expenses, and in Asia, we have gained market share in challenging economic conditions.
“We have concluded our portfolio review with the sale of Homeplus, our business in Korea, enabling us to take a significant step forward on our priority of strengthening the balance sheet. Further progress will be driven by continuing to increase the level of cash generated from our retained assets."
What analysts said
Despite the gloomy headline figures, Alex Joyner, senior analyst at Galvan Research said Tesco's results "should go some way to reassuring investors".
"UK sales figures continue to be the key metric and a fall of 1.1 per cent is better than we expected. The price cuts and store closures seem to have helped staunch the bleeding.
"However, whilst ‘Drastic’ Dave’s turnaround seems to be gathering momentum, it remains to be seen if Tesco can do enough to lure savvy shoppers back from Aldi and Lidl."