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

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Stephen Hawking's enthusiasm for colonising space makes him almost as bad as Trump

The physicist's inistence on mankind's expansion risks making him a handmaiden of inequality.

“Spreading out may be the only thing that saves us from ourselves,” Stephen Hawking has warned. And he’s not just talking about surviving the UK's recent run of record breaking heat. If humanity doesn’t start sending people to Mars soon, then in a few hundred years he says we can all expect to be kaput; there just isn’t enough space for us all.

The theoretical physicist gave his address to the glittering Starmus Festival of science and arts in Norway. According to the BBC, he argued that climate change and the depletion of natural resources help make space travel essential. With this in mind, he would like to see a mission to Mars by 2025 and a new lunar base within 30 years.

He even took a swipe at Donald Trump: “I am not denying the importance of fighting climate change and global warming, unlike Donald Trump, who may just have taken the most serious, and wrong, decision on climate change this world has seen.”

Yet there are striking similarities between Hawking's statement and the President's bombast. For one thing there was the context in which it was made - an address to a festival dripping with conspicuous consumption, where 18 carat gold OMEGA watches were dished out as prizes.

More importantly there's the inescapable reality that space colonisation is an inherently elitist affair: under Trump you may be able to pay your way out of earthly catastrophe, while for Elon Musk, brawn could be a deciding advantage, given he wants his early settlers on Mars to be able to dredge up buried ice.

Whichever way you divide it up, it is unlikely that everyone will be able to RightMove their way to a less crowded galaxy. Hell, most people can’t even make it to Starmus itself (€800  for a full price ticket), where the line-up of speakers is overwhelmingly white and male.

So while this obsession with space travel has a certain nobility, it also risks elevating earthly inequalities to an interplanetary scale.

And although Hawking is right to call out Trump on climate change, the concern that space travel diverts money from saving earth's ecosystems still stands. 

In a context where the American government is upping NASA’s budget for manned space flights at the same time as it cuts funds for critical work observing the changes on earth, it is imperative that the wider science community stands up against this worrying trend.

Hawking's enthusiasm for colonising the solar system risks playing into the hands of the those who share the President destructive views on the climate, at the expense of the planet underneath us.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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