Five questions answered on Tesco’s profit drop

Still the Uk's biggest chain.

The UK’s biggest supermarket chain, Tesco, has announced a significant drop in profit during the first half of the year. We answer five questions on Tesco’s profit woes.

By how much has Tesco’s profit dropped by?

Today the company reported a 23.3 per cent drop in profits during the first half of its financial year. The company blamed a challenging retail environment, especially in Europe.

The firm’s pre-tax profits in the six months to 24 August were £1.39bn.

UK like-for-like sales, excluding new store openings, fell by 0.5 per cent.

Tesco is a global company, how does this profit fall reflect in different area of its business?

 The supermarket giant said profits fell 67 per cent in Europe to £55m, while Asian profits, excluding China, dropped 7.4 per cent to £314m.

However, UK trading profits rose 1.5 per cent to £1.13bn.

Group profit margins fell from 5.4 per cent to 4.9 per cent.

What has Tesco said about these latest figures?

Chief executive, Philip Clarke, speaking to the BBC said:

"There is less pessimism around, but customers are still not seeing real disposable incomes improve.

"They are, perhaps, feeling a little better about the future.”

What have the experts said?

Neil Saunders, managing director of retail consultants Conlumino, speaking to the news broadcaster said:

"…it is fair to say that Tesco is making some progress, especially on the UK front," he said.

"However, they also indicate some more worrying signs that there are a number of deep seated issues on the international scene that need to be addressed."

How are Tesco’s competitors doing?

In this fiercely competitive market Tesco is still the UK’s biggest chain. However, rival Sainsbury's reported a 2 per cent rise in like-for-like sales during the second quarter of its financial year.

While Aldi saw UK pre-tax profits surge 124 per cent to £157.9m in 2012.

Sainsbury's chief executive Justin King said Sainsbury’s was the only major supermarket chain increasing its market share.

"Our groceries online business grew by over 15 per cent in the quarter and is now worth over £1bn in annual sales." he said.

"Our convenience business grew 20 per cent year-on-year as customers topped up more frequently during the warm summer weather."

Photograph: Getty Images

Heidi Vella is a features writer for Nridigital.com

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There's nothing Luddite about banning zero-hours contracts

The TUC general secretary responds to the Taylor Review. 

Unions have been criticised over the past week for our lukewarm response to the Taylor Review. According to the report’s author we were wrong to expect “quick fixes”, when “gradual change” is the order of the day. “Why aren’t you celebrating the new ‘flexibility’ the gig economy has unleashed?” others have complained.

Our response to these arguments is clear. Unions are not Luddites, and we recognise that the world of work is changing. But to understand these changes, we need to recognise that we’ve seen shifts in the balance of power in the workplace that go well beyond the replacement of a paper schedule with an app.

Years of attacks on trade unions have reduced workers’ bargaining power. This is key to understanding today’s world of work. Economic theory says that the near full employment rates should enable workers to ask for higher pay – but we’re still in the middle of the longest pay squeeze for 150 years.

And while fears of mass unemployment didn’t materialise after the economic crisis, we saw working people increasingly forced to accept jobs with less security, be it zero-hours contracts, agency work, or low-paid self-employment.

The key test for us is not whether new laws respond to new technology. It’s whether they harness it to make the world of work better, and give working people the confidence they need to negotiate better rights.

Don’t get me wrong. Matthew Taylor’s review is not without merit. We support his call for the abolishment of the Swedish Derogation – a loophole that has allowed employers to get away with paying agency workers less, even when they are doing the same job as their permanent colleagues.

Guaranteeing all workers the right to sick pay would make a real difference, as would asking employers to pay a higher rate for non-contracted hours. Payment for when shifts are cancelled at the last minute, as is now increasingly the case in the United States, was a key ask in our submission to the review.

But where the report falls short is not taking power seriously. 

The proposed new "dependent contractor status" carries real risks of downgrading people’s ability to receive a fair day’s pay for a fair day’s work. Here new technology isn’t creating new risks – it’s exacerbating old ones that we have fought to eradicate.

It’s no surprise that we are nervous about the return of "piece rates" or payment for tasks completed, rather than hours worked. Our experience of these has been in sectors like contract cleaning and hotels, where they’re used to set unreasonable targets, and drive down pay. Forgive us for being sceptical about Uber’s record of following the letter of the law.

Taylor’s proposals on zero-hours contracts also miss the point. Those on zero hours contracts – working in low paid sectors like hospitality, caring, and retail - are dependent on their boss for the hours they need to pay their bills. A "right to request" guaranteed hours from an exploitative boss is no right at all for many workers. Those in insecure jobs are in constant fear of having their hours cut if they speak up at work. Will the "right to request" really change this?

Tilting the balance of power back towards workers is what the trade union movement exists for. But it’s also vital to delivering the better productivity and growth Britain so sorely needs.

There is plenty of evidence from across the UK and the wider world that workplaces with good terms and conditions, pay and worker voice are more productive. That’s why the OECD (hardly a left-wing mouth piece) has called for a new debate about how collective bargaining can deliver more equality, more inclusion and better jobs all round.

We know as a union movement that we have to up our game. And part of that thinking must include how trade unions can take advantage of new technologies to organise workers.

We are ready for this challenge. Our role isn’t to stop changes in technology. It’s to make sure technology is used to make working people’s lives better, and to make sure any gains are fairly shared.

Frances O'Grady is the General Secretary of the TUC.