News

Tesco profits fall by more than half

Tesco’s share price has fallen this morning as the retailer revealed it has struggled to show signs of improvement a year after its profit dip.

Profits at Britain’s biggest retailer crashed from £779m to £354m with like-for-like sales being down by 1.1% [1]. Meaning there will be no dividend paid out to shareholders for this half [2].

Pre-tax profit was stated as £74m, compared with a loss of £19m for the same period last year. Its Chief Executive, Dave Lewis has said that Tesco has undergone a dramatic transformation in the year since he joined the business; “every important part of Tesco has been or is being transformed operationally, culturally or financially” [1].

Tesco has had a tough time of late losing dramatic sales to discount retailers such as Aldi and Lidl, with posting a record £6.4bn loss, one of the biggest in British corporate history.

On Tuesday, Tesco revealed that the new national living wage would cost £500m by 2020, putting further pressure on profits. It also announced it had plans to speed up processing payments to its smallest suppliers [1].

Despite this, Alex Joyner, Senior Analyst at Galvan Research has said Tesco’s results “should go some way to reassuring investors”. While Dave Lewis’ plans seem to be turning this around; “it remains to be seen if Tesco can do enough to lure savvy shoppers back from Aldi and Lidl” [2].

[1] The Guardian. ‘Tesco profits tumble by more than half’. http://www.theguardian.com/business
[2] City AM. ‘Tesco’s share price falls: Troubled supermarket reveals profits down 55pc, scraps plans to sell Dunhumby’. http://www.cityam.com/