Tesco posts catastrophic £6.38bn loss – the largest in its 96-year history

UK’s largest grocer says there will be no dividends for shareholders this year

Tesco has posted a record £6.38bn loss – a figure considerably worse than even the most pessimistic estimates by analysts ahead of the results.

The worst estimates had the retailer looking at losses of up to £5bn, but the company announced this morning that £7bn worth of writedowns and charges, driven by a £4.7bn collapse in the value of its property portfolio, had tipped it deep into the red.

The loss is in stark contrast to its pre-tax profit of £2.26bn last year.

The results follow a disastrous year for Tesco which was rocked by a £263m accounting scandal, a subsequent management overhaul, supplier mistreatment allegations, and investigations by the Serious Fraud Office and by the Financial Reporting Council.

“Erosion of competitiveness”

The firm’s CEO, Dave Lewis, who took the reins in the wake of the accounting crisis last year said he hopes today’s results will draw a line under Tesco’s difficulties.

“It has been a very difficult year for Tesco,” Lewis said. “The results we have published today reflect a deterioration in the market and, more significantly, an erosion of our competitiveness over recent years.

“We have faced this reality, sought to draw a line under the past and begun to rebuild, and already we are beginning to see early encouraging signs from what we’ve done so far.

“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.”

Store values decline

The huge collapse in the value of Tesco’s property reflects a significant change in British consumers’ shopping habits. Instead of customers using huge out-of-town complexes for weekly shops, Tesco has seen intense pressure from smaller discount retailers such as Aldi and Lidl. Aldi overtook Waitrose as the UK’s sixth largest supermarket, by market share, a fortnight ago.

No dividends for 2015

During a press conference, Lewis confirmed that Tesco shareholders will receive no dividends during 2015, and said: “Future dividends will be considered within context of group performance, free cash flow generation and the level of indebtedness.”

But despite the grim news, the City clearly still holds Dave Lewis in high regard. Shares in Tesco were expected to plunge following the results, but when markets opened, shares rose by just over 0.5% to 236p.


Now read:

Social Bookmarks