Tesco reports 6% profit fall

Tesco is living up to its “You shop, we drop” line, as it faces an uphill struggle to hang on to customers due to rival retailers taking market share.

The supermarket has recorded a 6% fall in group trading profits, which have slipped to £3.3bn. It is the second year in a row the company has reported a fall in profits.

But the fall isn’t as bad as many analysts had predicted. Some expected to see profits drop by up to 10%, down to £3bn.

The supermarket is suffering in the midground between discount retailers Aldi and Lidl at one end, and from Waitrose’ growth at the other. There has been a considerable surge in the popularity of discount stores in recent months, and Tesco is struggling to offer competitive prices.

The company’s core UK market has fallen to a 10 year low, while sales have fallen even further in Europe.

Group trading profit in Europe was down 28% to £238m, as sales across Ireland, Hungary, the Czech Republic, Poland, Turkey and Slovakia all dropped.

The tumble in sales has piled pressure on Tesco chief executive Philip Clarke who is facing calls to resign over the company’s poor performance.

Clarke said:  “We are transforming Tesco through a relentless focus on the most compelling offer for our customers.

“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.”

Speaking to the BBC about competition from discount retailers, Clarke said: “Discounters will never allow you to be cheaper than them. But you can get closer to them.”

He added: “I intend to be here to see this job through. We are in the middle of a very big change and I intend to see it through and lead my team.

“I will focus on what I have got to do. Many people want to talk about business leaders, but I know what I have got to do.”

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