Supermarket giant Tesco, Britain’s biggest retailer, has announced a second drop running in underlying annual profits as it hopes that recent expansion into India and China can offset weakness in Europe.
The company, the world’s third-biggest supermarket group, said on Wednesday its trading profit dropped 6.0 per cent to STG3.31 billion ($A5.95 billion) in the year to late February, compared with its performance in 2012/13.
But annual profit after tax though soared to STG974 million ($A1.75 billion) from STG28 million ($A50.36 million).
However, the previous year’s figures had been hit when Tesco decided to close its under-performing US business.
“Our performance in the (last) year was not where we had planned it to be,” Tesco said in its earnings statement.
“In the UK, we faced a weaker and increasingly competitive market in the second half,” said the group, which added that it had faced “difficult trading conditions” elsewhere in Europe.
Philip Clarke, Tesco CEO, noted: “We have significantly reduced our new investment in Europe, focusing the majority of our overseas capital on targeted, high-returning investments in Korea, Malaysia and Thailand.
“We have completed our exit from the US and established partnerships … (in China and India) which provide continued access to two of the world’s most exciting markets, consistent with a sustainable level of future investment.”
Tesco last month struck a joint venture deal with India’s Tata Group to become the first foreign supermarket to enter the country’s $US500 billion ($A536.02 billion) retail sector.
Tesco is also combining its branches in China, as well as the company’s Chinese shopping mall operation, with the China Resources Vanguard business.
The Asian deals announced over the past six months are attempts by Tesco to transform its fortunes after suffering in 2012/13 the group’s first drop in annual profits for almost two decades.
Tesco is battling weaker sales in main market Britain, and over the past two years has decided to close its failed US division Fresh & Easy and to exit from Japan.
In Britain, Tesco remains under pressure from supermarket rivals such as Sainsbury’s, Wal-Mart division Asda and German-owned discounters Aldi and Lidl.
Ahead of the latest results, Tesco was rocked by the resignation of its finance director Laurie McIlwee.