In its preliminary 2012/13 results published today (17 April), the firm also confirmed that it is winding up its chain of 199 US Fresh & Easy shops, which has never made a profit, at cost of 1.2 billion.
The UK’s biggest supermarket chain also revealed a one-off UK property write-down of 804 million.
Overall core pre-tax profit slumped by 51% to 1.96 billion, although with the cost of the US exit factored profit was down by almost 100% at 120 million.
Tesco said sales at UK stores in the past three months, excluding fuel and VAT sales tax, rose 0.5%, a slowdown from growth of 1.8% in the six weeks to 5 January when the company hailed strong Christmas trading.
Horsemeat
In a statement about the horsemeat scandal, Tesco said: “One major challenge in the final weeks of the year was the discovery in January of equine DNA in beef and other meat products throughout the UK industry. We responded immediately, leading the industry by withdrawing the four affected products, carrying out our own tests on potentially affected products and placing full-page notices to alert customers in the national press.
“Any performance impact appears to have been short-term and largely limited to those frozen meat categories where products were withdrawn and to chilled ready meals. We have seen customers choosing to substitute some of the directly-affected product groups with alternatives, such as fish and poultry.”
Successful re-launch
Elsewhere, the firm said that its re-launch of its Everyday Value range in April last year had proved very popular with customers with like-for-like sales tracking at over 6%.
Tesco added: “In addition, over 3,500 of our core Tesco Brand own-label products have been re-launched or improved, and this year we plan to deliver all 8,000 of these lines and also re-launch Tesco Finest – already one of the UK’s largest food brands in its own right.
“Using insights from dunnhumby, over 60% of our entire food range is now differentiated by sociodemographic groupings across all of our stores.”
Speaking about Tesco’s results, chief executive Philip Clarke said: “The announcements made today are natural consequences of the strategic changes we first began over a year ago and which conclude today. With profound and rapid change in the way consumers live their lives, our objective is to be the best multichannel retailer for customers.
“Our plan to ‘Build a Better Tesco’ is on track and I am pleased with the real progress in the UK. We have already made substantial improvements to our customers’ shopping experience, which are starting to be reflected in a better performance.
“We have set the business on the right track to deliver realistic, sustainable and attractive returns and long-term growth for shareholders. The consequences are non-cash write-offs relating to the United States, from which we today confirm our decision to exit, and for UK property investments which we will not pursue because of our fundamentally different approach to space.
“We have also faced external challenges which have affected our performance, notably in Europe and Korea.
“Our focus now is on disciplined and targeted investment in those markets with significant growth potential and the opportunity to deliver strong returns.”
