Tesco Returns To Profit After Record Loss

Tesco (Xetra: 852647 - news) has swung to an annual pre-tax profit of £162m after a record loss of £6.33bn a year ago.

Britain's biggest supermarket hailed "significant progress" in its turnaround as it published annual results for the year to 27 February.

It (Other OTC: ITGL - news) also reported a 0.9% rise in UK like-for-like sales for the fourth quarter, its first full quarter of growth since 2013 - as the group's recovery under boss Dave Lewis gathers pace.

The figure includes a strong performance over the six-week festive period when sales rose by 1.3%.

But shares fell 4% as Tesco said it was continuing to cut prices to stay competitive in a "challenging, deflationary and uncertain market" which would slow the pace of profit improvement, particularly in the first half.

Mr Lewis said: "We have made significant progress against the priorities we set out in October 2014.

"We have regained competitiveness in the UK with significantly better service, a simpler range, record levels of availability and lower and more stable prices."

Tesco tumbled to a record loss in the previous year as it took big accounting write-offs on the value of its business amid a fierce supermarket price war. It has also been hampered by a scandal centred on a £326m accounting black hole.

Mr Lewis, a former Unilever (NYSE: UL - news) executive, was appointed as chief executive in September 2014 after the supermarket parted company with predecessor Philip Clarke.

Tesco said that during the latest financial year it had improved service by adding 9,000 "customer-facing" roles and reducing prices on thousands of products.

The supermarket has also reviewed each of its 33 food categories, reducing the number of products by 18%, and cut the price of an average weekly shop by 3% in the last year, while introducing 2,000 new lines.

A management shake-up has seen 25% of office-based roles reduced, while 60 unprofitable stores have been closed.

Latest annual results stripping out finance costs showed an operating profit of £1.05bn, up from a £5.75bn loss the year before.

Mr Lewis has sought to streamline the business by selling off its loss-making Blinkbox online video operation and switching its main headquarters from Cheshunt to Welwyn Garden City.

It is also looking to offload businesses including garden centre chain Dobbies and restaurant business Giraffe.