Five questions answered on Tesco’s annual profit drop as it exits US

Fallen for the first time in 20 years.

Supermarket giant Tesco today announced that its annual profits have fallen for the first time in 20 years and that it will exit the US. We answer five questions on Tesco’s current troubles.

How much are Tesco’s profits down by?

The superstore announced today that pre-tax profits were down by 51 per cent to £1.96bn and that post-tax profits, including the cost of the US exit, were down 95.7 per cent to just £120m.

What have Tesco’s UK sales been like?

In the last 3 months Tesco, which is the world’s third-largest supermarket group, has reported a 0.5 per cent increase, excluding fuel and VAT sales tax. Which is a slow down in growth of 1.8 per cent in the six weeks to 5th January, after strong Christmas sales.  

For the last year, Tesco announced that total UK sales rose by 1.8 per cent to just over £48bn, with UK trading profit falling by 8.3 per cent to £2.27bn.

The company said its online grocery division was doing well with “another strong year” after sales grew by 2.8 per cent to £2.3bn.

How much has Tesco’s US exit cost the company?

Exiting its 199 Fresh & Easy stores in the US – which have never made a profit – is expected to cost the supermarket chain £1.2bn.

What other changes has Tesco announced?

As well as exiting the US, Tesco is also ending its operations in Japan, and referring to its China trading it said it would take a more measured approach.

The company has also announced a one-off UK property write-down, in which it has identified 100 sites it bought mainly through the property boom, but no longer plans to develop.

What have Tesco said in relation to these changes?

In a press statement Chief Executive Philip Clarke said:

"The announcements made today are natural consequences of the strategic changes we first began over a year ago and which conclude today. With profound and rapid change in the way consumers live their lives, our objective is to be the best multichannel retailer for customers.

We have set the business on the right track to deliver realistic, sustainable and attractive returns and long-term growth for shareholders. The consequences are non-cash write-offs relating to the United States, from which we today confirm our decision to exit, and for UK property investments which we will not pursue because of our fundamentally different approach to space.

We have also faced external challenges which have affected our performance, notably in Europe and Korea.

Our focus now is on disciplined and targeted investment in those markets with significant growth potential and the opportunity to deliver strong returns."

Photograph: Getty Images

Heidi Vella is a features writer for Nridigital.com

A small dose of facts could transform Britain's immigration debate

While "myth-busting" doesn't always work, there is an appetite for a better informed conversation than the one we're having now. 

For some time opinion polls have shown that the public sees immigration as one of the most important issues facing Britain. At the same time, public understanding of the economic and social impacts of immigration is poor and strongly influenced by the media: people consistently over-estimate the proportion of the population born outside the UK and know little about policy measures such as the cap on skilled non-EU migration. The public gets it wrong on other issues too - on teenage pregnancy, the Muslim population of the UK and benefit fraud to name just three. However, in the case of immigration, the strength of public opinion has led governments and political parties to reformulate policies and rules. Theresa May said she was cracking down on “health tourists” not because of any evidence they exist but because of public “feeling”. Immigration was of course a key factor in David Cameron’s decision to call a referendum on the UK’s membership with the EU and has been central to his current renegotiations.  

Do immigration facts always make us more stubborn and confused?

The question of how to both improve public understanding and raise the low quality of the immigration debate has been exercising the minds of those with a policy and research interest in the issue. Could the use of facts address misconceptions, improve the abysmally low quality of the debate and bring evidence to policy making? The respected think tank British Future rightly warns of the dangers associated with excessive reliance on statistical and economic evidence. Their own research finds that it leaves people hardened and confused. Where does that leave those of us who believe in informed debate and evidence based policy? Can a more limited use of facts help improve understandings and raise the quality of the debate?

My colleagues Jonathan Portes and Nathan Hudson-Sharp and I set out to look at whether attitudes towards immigration can be influenced by evidence, presented in a simple and straightforward way. We scripted a short video animation in a cartoon format conveying some statistics and simple messages taken from research findings on the economic and social impacts of immigration.

Targeted at a wide audience, we framed the video within a ‘cost-benefit’ narrative, showing the economic benefits through migrants’ skills and taxes and the (limited) impact on services. A pilot was shown to focus groups attended separately by the general public, school pupils studying ‘A’ level economics and employers.

Some statistics are useful

To some extent our findings confirm that the public is not very interested in big statistics, such as the number of migrants in the UK. But our respondents did find some statistics useful. These included rates of benefit claims among migrants, effects on wages, effects on jobs and the economic contribution of migrants through taxes. They also wanted more information from which to answer their own questions about immigration. These related to a number of current narratives around selective migration versus free movement, ‘welfare tourism’ and the idea that our services are under strain.

Our research suggests that statistics can play a useful role in the immigration debate when linked closely to specific issues that are of direct concern to the public. There is a role for careful and accurate explanation of the evidence, and indeed there is considerable demand for this among people who are interested in immigration but do not have strong preconceptions. At the same time, there was a clear message from the focus groups that statistics should be kept simple. Participants also wanted to be sure that the statistics they were given were from credible and unbiased sources.

The public is ready for a more sophisticated public debate on immigration

The appetite for facts and interest in having an informed debate was clear, but can views be changed through fact-based evidence? We found that when situated within a facts-based discussion, our participants questioned some common misconceptions about the impact of immigration on jobs, pay and services. Participants saw the ‘costs and benefits’ narrative of the video as meaningful, responding particularly to the message that immigrants contribute to their costs through paying taxes. They also talked of a range of other economic, social and cultural contributions. But they also felt that those impacts were not the full story. They were also concerned about the perceived impact of immigration on communities, where issues become more complex, subjective and intangible for statistics to be used in a meaningful way.

Opinion poll findings are often taken as proof that the public cannot have a sensible discussion on immigration and the debate is frequently described as ‘toxic’. But our research suggests that behind headline figures showing concern for its scale there may be both a more nuanced set of views and a real appetite for informed discussion. A small dose of statistics might just help to detoxify the debate. With immigration a deciding factor in how people cast their vote in the forthcoming referendum there can be no better time to try.