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

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Boris Johnson isn't risking his political life over Heathrow

The anti-Heathrow campaigner was never a committed environmentalist. 

A government announcement on expanding London’s airports is expected today, and while opposition forces have been rallying against the expected outcome - a third runway at Heathrow - the decision could also be a divisive one for the ruling Conservative party. A long consultation period will allow these divisions to fester. 

Reports suggest that up to 60 Conservative MPs are against expansion at the Heathrow site. The Prime Minister’s own constituents are threatening legal action, and the former London mayoral candidate, Zac Goldsmith, has promised to step down as MP for Richmond rather than let the airport develop.

But what of Boris Johnson? The politician long synonymous with Heathrow opposition - including a threat to lie down “in front of those bulldozers” - is expected to call the decision a mistake. But for a man unafraid to dangle from a zipwire, he has become unusually reticent on the subject.

The reticence has partly been imposed upon him. In a letter to her cabinet ministers, Theresa May has granted them freedom from the usual rules of collective responsibility (under which cabinet ministers are required to support government positions). But she has also requested that they refrain from speaking out in the Commons, from “actively” campaigning against her position, and from calling “into question the decision making process itself”.  

Johnson is not about to start cheering for Heathrow. But unlike Goldsmith, he is no committed environmentalist - and he's certainly a committed politician.  

Boris’s objections to the expansion at Heathrow have all too often only extended as far as the lives of his London constituents. These local impacts are not to be belittled – in his role of mayor of London, he rightly pointed to the extreme health risks of increased noise and air pollution. And his charisma and profile have also boosted community campaigns around these issues. 

But when it comes to reducing emissions, Johnson is complacent. He may have come a long way since a 2013 Telegraph article in which he questioned whether global warming was real. Yet his plan to build an alternative “hub” airport in the Thames Estuary would have left the question of cutting UK aviation emissions worryingly un-resolved. This lack of curiosity is alarming considering his current job as foreign secretary. 

And there are reasons to be concerned. According to Cait Hewitt at the Aviation Environment Federation, the UK fails to meet its targets for CO2 reduction. And the recent UN deal on aviation emission mitigation doesn’t even meet the commitments of the UK’s own Climate Change Act, let alone the more stringent demands of the Paris Agreement. “Deciding that we’re going to do something that we know is going to make a problem worse, before we’ve got an answer, is the wrong move”, said Hewitt.

There is a local environmental argument too. Donnachadh McCarthy, a spokesperson from the activist group “Rising Up”, says the pollution could affect Londoners' health: "With 70 per cent of flights taken just by 15 per cent of the UK's population... this is just not acceptable in a civilised democracy.”

The way Johnson tells it, his reason for staying in government is a pragmatic one. “I think I'd be better off staying in parliament to fight the case, frankly," he told LBC Radio in 2015. And he's right that, whatever the government’s position, the new “national policy statement” to authorise the project will likely face a year-long public consultation before a parliamentary vote in late 2017 or early 2018. Even then the application will still face a lengthy planning policy stage and possible judicial review. 

But if the foreign secretary does fight this quietly, in the back rooms of power, it is not just a loss to his constituents. It means the wider inconsistencies of his position can be brushed aside - rather than exposed and explored, and safely brought down to ground. 

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