Tesco’s half-year profits take a tumble in challenging retail environment in Europe

Tesco: UK performance strengthening

Tesco: UK performance strengthening

Tesco has recorded a 24% decline in pre-tax profits to £1.39bn at the interim stage and blamed a challenging retail environment in Europe for the fall.

In the UK, like-for-like sales for the 26 weeks ended 24 August 2013 were down 0.5%.

Chief executive, Philip Clarke, said: “The challenging retail environment in Europe has continued to affect the performance and profitability of our businesses there.”

According to Tesco, economic growth has seen further declines in some of its largest markets including Ireland and Poland, with consumer confidence still tracking at historically low levels. 

Tesco said it is responding to the shift in consumer behaviour in these markets and has limited new store openings and focused on convenience formats and online.

“The investments we have made to improve our offer for customers in the region are already starting to take effect and we expect a stronger second half as a result,” said Clarke.

Tesco said its performance in the UK had strengthened through the half, particularly in food, as its store refresh programme gathered momentum.

The business is also making strides in multi-channel retailing. Tesco said its online grocery businesses have continued to perform well across the Group, and it is now offering the service in over 50 cities across nine markets outside of the UK.

Confirmation of a joint venture with China Resources Enterprise accompanied Tesco’s results announcement.

The agreement will give Tesco a 20% stake in the largest food retail business in China and the combined business will have more than 3,000 stores.

Tristan Rogers, CEO of ConcretePlatform, an expert in helping retailers with international expansion, said: “The all too public failures of Fresh and Easy and Tesco’s Asian exploits perhaps show the location, format and commercial approach to growth are key components to success, and I believe Tesco would benefit from a rethink of how its inner workings are structured to deliver success in more challenging times.

“Adopting more modern collaborative working technologies is one area that could help; aligning more of the talent within the business to the task at hand. In such a large organisation this is not easy, and the change needs to be driven from the top. But the benefits are compound – maximising workforce and process efficiencies for existing business, and improving the odds of success for new initiatives.

“New collaborative working technologies are a game changer for enterprises prepared to engage them. I believe Tesco could drive out cost and drive up performance if it did.”