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Tesco turnaround plan 'may prompt further profit fall'

Tesco saw a reduction in profits of more than half in 2014/15. Credit: Andrew Milligan/PA Wire

Tesco boss Dave Lewis says the supermarket's trading profit could fall further in the coming year as it makes further investments to turn around its fortunes.

The £1.4 billion trading profit was more than halved in 2014/15 after what Lewis described as a "very difficult year", and Lewis said maintaining even that level of profit was not "without its challenges".

Our aspiration is to maintain the profit level at what it was last year but you should understand that if we feel we have to make further investments to keep the momentum of the business going ... we would.

– Dave Lewis, Tesco chief executive

Prior to today's update, analysts said they expected Tesco to post a trading profit of around £1.48 billion in 2015/16.

Tesco: What drove the supermarket's record loss

Tesco's £6.38 billion losses were driven by £7 billion in one-off charges.

Among the major contributors to that figure were:

  • £3.8 billion: A review of its store portfolio in light of industry conditions and declining profits
  • £925 million: A write-down in the value of work-in-progress, after decision to axe 39 new stores
  • £270 million: Yearly contribution agreed toward pension fund after valuation revealed £2.8 billion deficit
  • £416 million in restructuring costs

Tesco is undergoing a turnaround plan under new chief executive Dave Lewis, who took over from Phillip Clarke in August last year.


Tesco boss: 'We have drawn a line under the past'

Tesco reported a record £6.38 billion full-year loss. Credit: PA

Tesco chief executive Dave Lewis said the supermarket had endured a "very difficult year" as it reported the biggest annual loss in its 96-year-history.

The supermarket's massive losses came after an accounting scandal, a ferocious price war with rivals and a series of profit warnings - all of which followed a major write down on the value of its property portfolio.

"The results we have published today reflect a deterioration in the market and, more significantly, an erosion of our competitiveness over recent years.

"We have faced into this reality, sought to draw a line under the past and begun to rebuild, and already we are beginning to see early encouraging signs from what we’ve done so far."

Despite the heavy losses, Tesco saw a small increase in its UK like-for-like sales for the first time in more than four years during the final quarter.

Tesco faces huge compensation claim from shareholders

Tesco admitted in September 2014 it had overstated its profits. Credit: PA

Tesco is facing a multi-million pound compensation claim from shareholders over last year's accounts scandal.

The supermarket giant’s announcement in September that it materially overstated its profits caused a crash in its share value.

A non-profit organisation under the name Tesco Shareholders Claims Limited said:

A permanent destruction of value has occurred and had the accounting irregularities not taken place the share price, and value of the company, would today be materially higher.

TSC expects the claim to be in the region of 50p-70p per share. Tesco Plc has in excess of 8 billion shares listed.

– Tesco Shareholders Claims Limited


Tesco 'committed' to reducing food poisoning bug

Tesco has said it is "committed" to reducing the food poisoning bug campylobacter in poultry.

'Providing safe food is always our absolute priority,' Tesco said. Credit: PA Wire

"Providing safe food is always our absolute priority," a Tesco spokesperson said.

"Whilst there is no simple solution to prevent its presence in raw poultry we have and will continue to work in close collaboration with our suppliers, scientists and relevant industry experts to make solid progress to tackle the problem at all stages of the supply chain."

Report: Tesco preparing to cut up to 10,000 jobs

Supermarket giant Tesco is going to axe up to 10,000 jobs in a major shake-up at the crisis-hit retailer, according to reports.

The UK's biggest supermarket is preparing to put 6,000 members of staff out of work from its head office, according to Sunday Telegraph.

Tesco have not commented on the report it is planning to put 10,000 of its employees out of work. Credit: PA Wire

The report comes after last month's announcement that it would be closing 43 of its stores, putting 2,000 people at risk of losing their jobs.

A spokesman for the supermarket declined to comment on the report.

Chief executive Dave Lewis is embarking on a major overhaul of Tesco stores after two successive years of falling profits and an accounting scandal.

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