Tesco reports record profits

Britain's biggest retailer, has reported record profits of £3.8bn – more than £10m a day – but admitted that it needs to do better in its core UK operations.

Results for the year to end February, released on Tuesday, showed the bulk of Tesco's 12.3% profit increase came from its growing Asian operations.

Total group sales were £68bn and in Britain sales grew 5.5% to £45bn, with trading profits ahead by 3.8% to £2.5bn.

But the performance was not good enough, Tesco's new boss Philip Clarke admitted. "We didn't achieve our planned growth in the year and this was only partly attributable to the deterioration in the consumer environment during the second half. We can do better and we are taking action in key areas – for example, to drive a faster rate of product innovation and to improve the sharpness of our communication to customers."

Like-for-like sales in the UK, excluding VAT and petrol, declined by 0.7% in the last three months of Tesco's financial year. General merchandise, clothing and electricals fared particularly badly, Tesco said. "Our performance in electrical goods was below the market and the growth in clothing was also not as strong as we had planned."

The retailer's US losses also worsened in 2010, rising to £186m. Tesco said the increased losses reflected acquisition costs and Clarke, who took over from Sir Terry Leahy six weeks ago, reaffirmed his commitment to the US Fresh & Easy business.

"Fresh & Easy is loved by customers who shop in it. The easiest thing would be to cut and run, but the sensible thing is to improve the business and get more customers," he told the BBC Radio 4 Today programme.

Clarke suggested he would be taking a somewhat softer approach than his predecessor. "In the way I deal with the press and investors and our own people I can soften [the image] a little. I am a little more open and that's the style I would like here."

Matthew McEachran, retail analyst at Singer Capital Markets, suggested the sharpening of Tesco's UK focus would worry rivals. "With over £5bn of [general merchandise] sales, and space potentially increasing by 10% per annum, intensification of their offer will result in more pressure for a number of general retailers including those already having to compete harder."

Tesco's strongest growth came in Asia where profits grew by 30% to £570m.

Shares in Tesco opened down by 0.6%, a fall of 2.5p to 397p.

Source : Alex Hawkes - Guardian.co.uk