Tesco sees tough year ahead as profit falls

LONDON, April 16 (Reuters) - Britain's biggest retailer Tesco (Xetra: TCO.DE - news) said it expected tough trading to continue as it posted a 6 percent fall in annual profit, its second straight year of decline.

The world's third-largest retailer said on Wednesday group trading profit for the year to February 22 was 3.3 billion pounds ($5.52 billion), in line with analysts' forecasts of 3.24 billion pounds but down on the 3.45 billion posted in 2012-13.

Sales at British stores open over a year, excluding fuel and VAT sales tax, fell 3.0 percent in its fourth quarter, the sharpest quarterly drop recorded during Chief Executive Phil Clarke (Toronto: CKI.TO - news) 's three year tenure.

The decline increases the heat on Clarke, two years into a turnaround plan which despite billions spent has failed to stop its core British market share slipping to a near 10 year low under pressure from hard discounters Aldi and Lidl and upmarket grocers Waitrose and Marks & Spencer (Other OTC: MAKSF - news) .

($1 = 0.5977 British Pounds) (Reporting by Neil Maidment; Editing by Kate Holton)