Tesco group releases interim results for 2013/14
Tesco releases interim results for 2013/14, showing UK market is growing but EU market still faces challenges
4 October 2013
Tesco has released its interim results for 2013/14, which the grocery giant says show its UK market is continuing to grow and strengthen up, while its European market still faces challenges. Tesco’s group trading profits for the UK were £1.588 billion while trading profit in Europe only accounted for £55 million.
In the report, the group claims it has continued to make steady progress in the three strategic priorities that were outlined in April. The priorities involved continuing to invest in a strong UK business, establishing multichannel leadership in all markets and pursuing disciplined international growth.
On its aims of building a better Tesco in the UK, the group says its efforts are being noticed by more customers and its overall performance is improving. The group has continued to invest in all parts of its offer with the biggest changes being an overall improvement in the quality of its own-brand products.
Challenging economic conditions overseas, particularly in Europe, have held back consumer confidence and spending, leading to a lower level of sales than expected. This has impacted profitability in the first half, and will therefore offset at least some of the benefit of our UK improvement in the full year results.
The group has taken further steps towards establishing multichannel leadership in all of its markets. Tesco’s online grocery home shopping business has now been rolled out to more than 50 cities overseas and is seeing strong growth in all markets, including the UK.
Tesco’s focus on disciplined international growth has seen it further reduce its capital investment overseas, with a greater proportion allocated to those markets which offer the group significant growth potential and the opportunity to deliver strong returns, such as Korea, Malaysia and Thailand.
Total sales in Europe increased by 1.2% at actual rates and declined by 3.1% at constant rates. Like-for-like sales declined by 5.0% for the region as a whole, with a small improvement in performance towards the end of the first half.
The group saw a continuation of the external trends from the second half of last year, characterised by a difficult economic environment, strong competition and a consumer preference for smaller store formats, linked to high fuel costs and a desire by many consumers to manage household budgets on a day-to-day basis. The supermarket chain’s trading margin performance reflected investment in its offer for its customers as well as the negative leverage associated with like-for-like sales declines.
In Ireland, the economy slipped back, albeit temporarily, into recession and consumers have faced further pressures on household finances. As a result, the limited-range discounters have fared better than those, like Tesco, with a broader offer. The group plans to address this in the second half. Despite the challenging conditions, Ireland, like Hungary, remains a high-returning business.
The group has made notable progress in online grocery, where it is unrivalled in its offer across Central Europe. Customers can now choose from around 20,000 fresh, grocery, and household products, with two-hour delivery slots available in all markets. Its service is already available in more than 30 major cities across the region and its progress will continue through the year.
Speaking on the results of the report, Philip Clarke, chief executive said: "Despite continuing challenges, we have made further progress on our strategic priorities. We are strengthening our UK business, working to establish multichannel leadership and pursuing disciplined international growth."
"The challenging retail environment in Europe has continued to affect the performance and profitability of our businesses there. The investments we have made to improve our offer for customers in the region are already starting to take effect and we expect a stronger second half as a result."