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

Photo: Getty
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Like it or hate it, it doesn't matter: Brexit is happening, and we've got to make a success of it

It's time to stop complaining and start campaigning, says Stella Creasy.

A shortage of Marmite, arguments over exporting jam and angry Belgians. And that’s just this month.  As the Canadian trade deal stalls, and the government decides which cottage industry its will pick next as saviour for the nation, the British people are still no clearer getting an answer to what Brexit actually means. And they are also no clearer as to how they can have a say in how that question is answered.

To date there have been three stages to Brexit. The first was ideological: an ever-rising euroscepticism, rooted in a feeling that the costs the compromises working with others require were not comparable to the benefits. It oozed out, almost unnoticed, from its dormant home deep in the Labour left and the Tory right, stoked by Ukip to devastating effect.

The second stage was the campaign of that referendum itself: a focus on immigration over-riding a wider debate about free trade, and underpinned by the tempting and vague claim that, in an unstable, unfair world, control could be taken back. With any deal dependent on the agreement of twenty eight other countries, it has already proved a hollow victory.

For the last few months, these consequences of these two stages have dominated discussion, generating heat, but not light about what happens next. Neither has anything helped to bring back together those who feel their lives are increasingly at the mercy of a political and economic elite and those who fear Britain is retreating from being a world leader to a back water.

Little wonder the analogy most commonly and easily reached for by commentators has been that of a divorce. They speculate our coming separation from our EU partners is going to be messy, combative and rancorous. Trash talk from some - including those in charge of negotiating -  further feeds this perception. That’s why it is time for all sides to push onto Brexit part three: the practical stage. How and when is it actually going to happen?

A more constructive framework to use than marriage is one of a changing business, rather than a changing relationship. Whatever the solid economic benefits of EU membership, the British people decided the social and democratic costs had become too great. So now we must adapt.

Brexit should be as much about innovating in what we make and create as it is about seeking to renew our trading deals with the world. New products must be sought alongside new markets. This doesn’t have to mean cutting corners or cutting jobs, but it does mean being prepared to learn new skills and invest in helping those in industries that are struggling to make this leap to move on. The UK has an incredible and varied set of services and products to offer the world, but will need to focus on what we do well and uniquely here to thrive. This is easier said than done, but can also offer hope. Specialising and skilling up also means we can resist those who want us to jettison hard-won environmental and social protections as an alternative. 

Most accept such a transition will take time. But what is contested is that it will require openness. However, handing the public a done deal - however well mediated - will do little to address the division within our country. Ensuring the best deal in a way that can garner the public support it needs to work requires strong feedback channels. That is why transparency about the government's plans for Brexit is so important. Of course, a balance needs to be struck with the need to protect negotiating positions, but scrutiny by parliament- and by extension the public- will be vital. With so many differing factors at stake and choices to be made, MPs have to be able and willing to bring their constituents into the discussion not just about what Brexit actually entails, but also what kind of country Britain will be during and after the result - and their role in making it happen. 

Those who want to claim the engagement of parliament and the public undermines the referendum result are still in stages one and two of this debate, looking for someone to blame for past injustices, not building a better future for all. Our Marmite may be safe for the moment, but Brexit can’t remain a love it or hate it phenomenon. It’s time for everyone to get practical.