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Tesco posts first drop in annual profits for almost two decades
Tesco posts first drop in annual profits for almost two decades

Tesco posts first drop in annual profits for almost two decades

FMCG SUPPLIER NEWS

4C Group - Apr 19th 2013, 13:39

On Tesco’s full-year results, David Gray, Retail Analyst at Planet Retail, commented:  

“As expected, Tesco delivered its first drop in annual profits in almost two decades as it continued to channel investment into the UK overhaul programme. Trading at home was dampened by the effects of the horsemeat scandal, despite further progress on the overhaul plan. In non-food, Tesco will need to put further effort into ranging and merchandising to offset sliding sales. Online continues to grow strongly, although it’s increasingly clear this comes at the expense of sales at out-of-town hypermarkets. Further work will be needed to combat this and turn Tesco’s hypermarkets into truly compelling retail destinations.

“In international, as anticipated, sales in both Europe and Asia were impacted by harsh headwinds. In Europe, the chill from the Eurozone crisis continues to hit trading. Meanwhile in Asia, a slowdown in China alongside regulatory changes in Tesco‘s largest international market of South Korea, are dampening sales. The situation in the latter could worsen, with further rules restricting large store openings near traditional marketplaces expected to come into force later this year.

“Nevertheless, we are encouraged by progress on the grocery e-commerce roll-out – with its recent introduction in Thailand, Malaysia and Hungary – although we note that grocery e-commerce remains in its infancy in many of these markets – meaning any further roll-out is likely to be measured.

“In the US, Tesco’s announcement of its intention to exit was welcome news for investors – even if the writedown of US assets will prove unhelpful in the short term. We continue to believe the operation is likely to be split up between a handful of competing buyers such as Aldi Süd, Trader Joe’s (Aldi Nord) and, potentially, US dollar stores – rather than sold off in its entirety.”

 

Read more about: consumer markets | asia | grocery chain | uk | tesco

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