Dave Lewis has put his faith in Tesco’s large supermarkets and vowed to rebuild the company around them after the turmoil at the retailer led to it recording one of the biggest losses in British corporate history, reports The Telegraph.
Mr Lewis, the chief executive of Tesco, said that large supermarkets were “not the dinosaurs that they have been painted to be” and that their performance was improving as the company lowers prices, improves the availability of key products, and puts more staff on the shop floor.
The Tesco boss insisted that the “fundamental core of our business is still really strong” as he sought to reassure investors that Britain’s biggest retailer can turn around its performance.
Tesco reported a pre-tax loss of £6.4bn for the year to the end of February, the biggest ever recorded by a retailer and the sixth biggest in British corporate history.
Mr Lewis said that it had been a “very difficult year” for Tesco, while one retail analyst said that the “decadent retail dynasty of Tesco has come to an end”.
The loss reflects a year of turmoil that has seen the supermarket retailer suffer a slump in sales, become embroiled in an accounting scandal, and oust swathes of senior executives.
Tesco was dragged deep into the red by £7bn of one-off charges. These include an impairment charge of £4.7bn on the value of its struggling supermarkets, £570m on stock, and £416m of restructuring charges as it makes more than 10,000 staff around the world redundant and closes shops.
The company also revealed that size of the blackhole in its profits that was caused by the accounting scandal is larger than feared. After further investigations about how it booked income from suppliers, Tesco believes it overstated profits by £208m in previous year, up from £145m in October. This takes the overall impact of the scandal, including the cost in the last financial year, to £326m.
The size of the statutory loss is even worse than the City and analysts were expecting. However, more than 90pc of the one-off charges are non-cash and reflect a change in the value of the assets controlled by Tesco, rather than cash it has actually lost.
The company reported trading profits of £1.39bn for the year to the end of February, down 58pc on last year. This figure excludes the one-off charges.
Mr Lewis warned that Tesco could struggle to maintain this level of profit in the next 12 months as it spends money on modernising stores and cutting prices. The company made an operating loss of almost £40m in the UK in the second half of the year.
Mr Lewis’s caution about the year ahead sent shares in Tesco tumbling. Tesco shares rose in early trading before falling back to close down 12.10, or 5pc, to 222.65p.