Profit drop forecast at Tesco after costly comeback plan

British retail giant Tesco is expected to announce its first year-on-year decline in underlying profits in two decades, as a result of last year’s expensive turnaround plan.


Analysts expect that the group will announce an underlying pretax profit of £3.5bn for the year to February 2013, down 10.7 per cent from £3.92bn the previous year, at its preliminary results tomorrow.

The company, which makes over 60 per cent of its revenues from its domestic market, has struggled to maintain its market share against rivals such as J Sainsbury and Asda. Following a profit alert last year, the retailer launched a one billion pound plan to claw back its position, investing in more staff and improved product ranges.

Other factors impacting Tesco’s earnings are the Eurozone debt crisis, regulatory issues in South Korea and its loss-making Fresh & Easy business in the US.