Tesco profit up but UK hit by dip in sales

TESCO chief executive Philip Clarke yesterday issued a six-point mission statement aimed at putting the retailer back on track after disappointing results.

UK like-for-like sales excluding fuel in the fourth-quarter saw a 0.7 per cent year-on-year drop as consumers reined in their spending.

Clarke, who took over from Sir Terry Leahy last month, said the UK performance was not good enough as it failed to keep up with rivals in areas such as clothing and electricals.

UK general merchandise sales dropped 3.3 per cent in the second-half. Asia offset some of the retailer’s flagging markets, allowing it to record pre-tax profit up 11.3 per cent to £3.54bn the year to 26 February.

However, Clarke issued a six-point action plan, including a push to improve non-food sales in the UK.

He said: “We didn’t achieve our planned growth in the year and this was only partly attributable to the deterioration in the consumer environment during the second-half.

“We can do better and we are taking action in key areas – for example, to drive a faster rate of product innovation and to improve the sharpness of our communication to customers.”

The company cited its move into the secondhand car market through Tesco cars as an example of the innovation it would be pursuing.

The retailer’s US losses also worsened in 2010, rising to £186m. Tesco said the increased losses reflected acquisition costs and Clarke, who took over from Sir Terry Leahy six weeks ago, reaffirmed his commitment to the US Fresh and Easy business.

“The headline numbers are slightly disappointing, particularly in the UK, where Tesco’s non-food offer clearly needs some work,” said analyst Philip Dorgan of Panmure.