TESCO has swung back into the black after unveiling its first quarter of UK sales growth for more than three years, but warned its fightback amid a fierce price war would put profits under pressure.
The UK's biggest supermarket, which has 30,000 staff and 232 stores in Scotland, said it had made ‘significant progress’ in its turnaround battle as it edged out of the red with bottom-line pre-tax profits of £162 million for the year to 27 February 2016.
This compares with losses of £6.3 billion the previous year – the worst in its history and one of the biggest losses in UK corporate history as the retailer booked £7 billion of impairments, writedowns and restructuring charges.
"We have made significant progress against the priorities we set out in October 2014,” said chief executive Dave Lewis. “We have regained competitiveness in the UK with significantly better service, a simpler range, record levels of availability and lower and more stable prices. Our balance sheet is stronger and we are making good progress in rebuilding trust in Tesco and our investment case.
However, revenue slipped more than 4 per cent to £54.43 billion as the supermarket chain continued to struggle in a “challenging, deflationary and uncertain” UK food market, including competition from German discounters Aldi and Lidl.
Tesco’s shares fell 3 per cent as it cautioned its investment in price cuts would slow profit improvement, “particularly in the first half".
Tesco's recovery will not be a "straight line", Mr Lewis admitted, and said the job to turn around its fortunes was not yet done.
Since the start of its financial year, the retailer has shut 60 unprofitable stores – including four in Scotland in Kirkcaldy, Grangemouth, Troon and Edinburgh – and shelved plans to open a further 49 shops.
In the coming months, a new Tesco Express store was due to open on Dundas Street in central Edinburgh, creating around 20 new jobs, a spokesman said. Earlier this year Tesco announced the creation of an additional 200 jobs at its Dundee customer engagement centre, which already employs 1,000. Around 1,600 staff also work at the group’s distribution centre in Livingston, which services every store in Scotland.
The spokesman declined to comment on speculation that Tesco would be selling off Dobbies, its Midlothian-based garden centre chain.
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