Tuesday 27 September 2016

Tesco's profits plunge as turnaround continues

Paul O'Donoghue

Published 08/10/2015 | 02:30

Tesco is Ireland's biggest grocery retailer
Tesco is Ireland's biggest grocery retailer

Tesco's profits plunged by more than half to £354m (€481m) in the first half of its financial year as it continues to grapple with a turnaround project aimed at reviving its fortunes.

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And Britain's biggest retailer - rocked by an accounting scandal last year - said that like-for-like sales at its Irish arm have continued to decline. They fell 3.7p in the six months that ended on August 29.

However, that was an improvement on the 6.3pc like-for-like drop it reported in Ireland during the first half of the previous financial year.

Tesco - which is also Ireland's biggest grocery retailer - also insisted that an investment it's making to lure shoppers here has been bearing fruit.

"In the Republic of Ireland, we have made a significant investment to ensure our customers receive the most competitive offer possible when shopping with Tesco," it said. "The response so far has been encouraging, with an improving trend in both sales and volume throughout the half and an increase in market share for the first time since 2013."

Figures released by research group Kantar Worldpanel last week show that Tesco's sales in Ireland returned to growth in the 12 weeks to September 13. But while the value of Tesco's sales in the period rose 0.3pc, its share of the grocery market actually dipped 0.4 percentage points year-on-year.

It has a 24.8pc share of the Irish grocery market, with SuperValu hot on its heels with 24.3pc.

During its last financial year, Tesco's like-for-like sales in Ireland, including fuel but excluding VAT, fell 6.4pc to €2.55bn from €2.69bn.

Tesco has sold its business in South Korea for £4.2bn, but chief executive Dave Lewis - who was parachuted in last year as the accounting scandal erupted - said that the group has now concluded is asset disposal programme. It had been looking at selling its data analytics division, Dunnhumby, and there had been speculation that it might have sold some of its units in Eastern Europe.

"We have delivered an unprecedented level of change in our business over the last twelve months and it is working," said Mr Lewis. "The first half results show sustained improvement across a broad range of key indicators."

He also welcomed growth at its businesses in Europe.

"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," added Mr Lewis.

The group also slowed the rate of sales decline at its UK arm. Like-for-like sales there fell 1.1pc in the first half of its financial year, compared to a 4pc fall in the first half of the previous financial year.

Tesco is reportedly in talks with the UK's Serious Fraud Office to negotiate a plea bargain that could enable it to avoid a criminal conviction from the accounting probe.

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