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I stay, says under-fire Tesco boss
Tesco boss Philip Clarke insisted he is staying put today after Britain's biggest supermarket revealed a second year in a row of falling profits and a deepening deterioration in UK sales.
The embattled chief executive brushed off speculation about his future despite no sign that his £1 billion plan to turn around the retail juggernaut was bearing fruit.
Underlying pre-tax profits fell 6.9% to £3.05 billion for the year to February 22 while fourth-quarter like-for-like sales slumped by 3%, after a 1.5% fall in the third quarter.
The group admitted the performance was "not where we had planned it to be" and warned that the challenging environment would continue.
It faces an unwanted hat-trick of annual declines as it admitted profits were expected to fall again for the current financial year, and there is growing disquiet among some in the City over the chief executive's leadership.
But Mr Clarke, who is in his 40th year at the supermarket after working his way up from the shop floor to take over as boss three years ago, said: "I have got no intention of going anywhere.
"All my waking hours are spent running Tesco. It's what I love. I'm going to see this thing through."
He added: "Our results today reflect the challenges we face in a trading environment which is changing more rapidly than ever before. We are determined to lead the industry in this period of change."
Tesco is facing a looming price war with its major rivals as they face up to a permanent threat from discounters Aldi and Lidl, which continue to gnaw at their market shares despite improving economic conditions.
Mr Clarke said a previously-announced investment of £200 million in price cuts was "just a start" but it would be "reckless" to disclose the scale of any further investment in the wake of a pledge by Morrisons to plough £1 billion into increasing value for shoppers over three years.
Tesco says it has already cut the cost of staples including butter, milk and eggs by an average of 24% and Mr Clarke said customers would see more prices coming down in the weeks and months ahead.
"We have got a big and bold plan and customers are going to get better value."
The results showed UK online sales up 11% and Tesco Express convenience stores improving by 1.1% on a like-for-like basis over the year.
It compared with a 1.4% fall in overall UK like-for-like sales, excluding petrol, highlighting the dire performance of its core supermarket estate.
But Mr Clarke is putting his faith in a £500 million "refresh" programme to update the stores, which he says has been shown to improve sales by 3%-5% at each site.
He also stressed the importance of multi-channel initiatives and the expansion of the convenience network, now including nearly 1,700 Express sites and more than 700 one-stop stores.
Tesco has more than 3,000 UK shops employing more than 300,000 people, with sales of £48.2 billion at home and £70.9 billion overall.
Mr Clarke defended the latest hits to the balance sheet from overseas ventures.
A one-off charge of £801 million, mainly relating to a write-down of assets in Europe - where profits fell by more than a quarter - was topped up by a £540 million charge after merging its stores in China into a joint venture.
It has also previously faced a £1.2 billion hit from giving up the Fresh & Easy chain in the US.
But Mr Clarke pointed to Tesco's £20 billion in sales outside its home country and its leading positions in fast-growing markets.
The group's dividend remained unchanged and trading profit margin fell from 5.51% to 5.17% - both likely to disappoint investors. But shares rose 3% after the profits decline was not as bad as expected.
Latest industry figures showed that Tesco saw its market share fall to 28.6% in the 12 weeks to March 31, from 29.7% a year earlier.
Tesco has also recently been rocked by the resignation of finance director Laurie McIlwee, who announced earlier this month that he was to leave after 14 years at the group.
He was reported to have lost faith in Mr Clarke's strategy, though he spoke positively about the plans in a conference call with reporters following the latest results.
Mr Clarke is in the midst of a £1 billion turnaround plan which was launched in the face of last year's first fall in group profits in nearly 20 years.
Tesco has been retrenching from loss-making international businesses to focus recovery efforts on the UK, where it is scrapping more than 100 major store developments and focusing growth on convenience stores and online.
Analysts at Shore Capital said the latest results would make for very disappointing reading for shareholders.
"The business, once a shoppers' champion, is in a cycle of what seems to be structural decline involving a sustained period of downgrades to earnings," they said.
There was embarrassment for Tesco as it had to correct a caption on the group's website which appeared to warn of another profits fall for the current 2014/15 financial year.
The caption at the start of the chief executive's video blog said: "UK profits fell in the last year and are expected to fall again this year."
But Mr Clarke appeared taken aback when asked about the apparent admission in a call with journalists this morning.
He made clear that Tesco was not giving a forecast and that the statement reflected the views of City experts.
It had later been changed to say: "UK profits fell in the last year and analysts expect them to fall again this year."
A source close to Tesco said the initial wording appeared to be an "honest mistake".