Tesco reports record loss of $11.6 billion
BRITAIN'S biggest retailer, supermarket group Tesco, announced yesterday that it had suffered a record loss last year - the largest in its 96-year history - as it took a huge writedown on the value of its property.
Tesco, which was hit by a major crisis last October after accounting errors that overstated profits, reported a loss after tax of £5.74 billion (S$11.6 billion) in the 12 months to the end of February.
That compared with a net profit of £974 million in 2013/14, the group said in an earnings statement.
"It has been a very difficult year for Tesco," chief executive Dave Lewis said in the statement.
"The results we have published reflect a deterioration in the market and, more significantly, an erosion of our competitiveness over recent years."
Tesco announced £7 billion of one-off charges, mostly linked to a writedown on the value of its property.
It also included an impairment of £630 million relating to Tesco's investment with China Resources Enterprise in the Chinese supermarket sector.
Said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers: "The outlook for the business remains unclear as (the) management seeks to spin several plates at once, with focus on such matters as the general restructuring, cost savings and an effort to regain some competitive composure."
Stripping out the exceptional charges, Tesco reported annual pre-tax profit of £961 million, down 68 per cent.
Tesco said it was increasing transparency and seeking to build "longer-term, mutually beneficial partnerships" with its suppliers as it tries to rebuild trust in the market.
It is seeking to simplify the deals it negotiates with suppliers, noting that it was currently using over 20 different kinds of payment terms, including multiple offers and rebates when agreed sales volume targets are met.
It also gave more details on how it accounts for supplier deals and the impact on its balance sheet, and said it had launched new guidelines for staff members in this area.
"The market is still challenging and we are not expecting any let-up in the months ahead," said Mr Lewis, who joined Tesco in September.
Shortly after his arrival, Tesco revealed that it had overstated profits by £263 million as a result of accounting errors stretching back to before 2013.
Britain's Serious Fraud Office (SFO) is probing the accounting blunder at the group, which is the world's third-biggest supermarket chain after France's Carrefour and global leader Walmart.
"It is not possible to predict the timescale or outcome of the SFO investigation, but the SFO could decide to prosecute individuals and the group, and there is the possibility of fines, or other consequences," Tesco said yesterday.
The supermarket giant is facing fierce competition in Britain from German-owned discounters Aldi and Lidl, as well as from traditional supermarket rivals comprising Walmart division Asda, Sainsbury's, Morrisons and Waitrose.
AGENCE FRANCE-PRESSE, REUTERS