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Tesco Says Crisis Over As Profits Return

Tesco (Xetra: 852647 - news) boss Dave Lewis has said he led the business out of crisis after it swung to an annual pre-tax profit of £162m following 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 Mr Lewis gathers pace.

Tesco said it was continuing to cut prices to stay competitive in a "challenging, deflationary and uncertain market" - and warned this would slow the pace of profit improvement, particularly in the first half of the current financial year.

Its share price closed almost 8% lower.

Mr Lewis, a former Unilever (NYSE: UL - news) executive, took over a year and a half ago, after the embattled group parted company with previous boss Philip Clarke amid a ferocious supermarket price war.

Soon afterwards the new boss also had to deal with the fallout from a £326m accounting scandal but the chief executive has now indicated the business is turning a corner.

He said: "We feel like we stabilised the business. We don't feel that we're in the crisis that, being candid, we were 16 months ago. More customers are buying more things more often at Tesco.

"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 had tumbled to a record loss in the previous year as it took big accounting write-offs on the value of its business.

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

Shore Capital analyst Clive Black said: "We believe that Dave Lewis deserves considerable credit for steering this near retail shipwreck to calmer waters."

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.

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.