Tesco reports £6.38bn loss

Tesco made a loss of £6.38bn in its last financial year, the worst in its history and the sixth-biggest announced by a UK company.

The bulk of the statutory loss came from £7bn in one-off charges, the majority in a £3.8bn writedown on the value of its store portfolio "reflecting challenging industry conditions and profit decline," Tesco said.

Chief executive Dave Lewis said the wider results for the year to 28 February reflected "a deterioration in the market and, more significantly, an erosion of our competitiveness over recent years".

The last financial year saw Tesco forced into a string of profit warnings as trading continued to deteriorate amid an industry-wide price war, costing Mr Lewis' predecessor, Philip Clarke, his job.

Trading profit for 2014/15 fell 58% to £1.4bn but the chain said today its like-for-like sales volumes in the UK were now in growth for the first time in four years as Mr Lewis sought to put the customer first and implement wider changes to limit costs.

It admitted tough trading continued overseas, with like-for-like sales in Ireland falling more than 6%.

Last autumn, it emerged that Tesco had overstated profits by £263m, sparking a series of inquiries involving the Serious Fraud Office, the accounting watchdog and the Groceries Code Adjudicator.

The trading ‎issues prompted Mr Lewis to announce an overhaul of the way it deals with suppliers in the UK.

Tesco suspended nine executives over the affair, most of whom have left the company, some after being reinstated to their roles.

In January, Mr Lewis outlined proposals to relocate Tesco's head office, close dozens of stores and terminate the building of 49 new stores - the latter decision contributing £925m to its writedown.

He also plans to sell a stake in Dunnhumby, its customer loyalty arm, and has introduced a long-term price-cutting initiative across hundreds of core grocery items.

In total, a cull of head office staff will involve thousands of job cuts though Tesco said it had created more customer-facing roles.

One extra cost Tesco has agreed is to contribute £270m a year to its pension fund after a valuation revealed a £2.8bn deficit at the end of March last year.

Its defined benefit pension scheme was closed earlier this year as part of the drive to preserve cash for the company's recovery.

Mr Lewis said: "The market is still challenging and we are not expecting any let-up in the months ahead.

"When you add to this the fundamental changes we are making to our business and our offer, it is likely to lead to an increased level of volatility in short-term performance.

"Our clear priority - and the one that will deliver sustainable value for our shareholders - is to improve consistently for customers.

"The changes we have made and will continue to make put us in a stronger position to do this."

Tesco's shares, which have lost almost 19% of their value over the past 12 months, gained more than 2% when the FTSE opened for business on Wednesday.

They were 25% up in 2015 to date, with investors heartened by Mr Lewis' turnaround efforts.

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Source : Sky News
http://news.sky.com/story/1469800/tesco-plunges-to-worst-annual-loss-of-6-38bn