Tesco reports record loss of £6.4bn

Posted by Tom Line in Personal Finance on 24 April 2015 - Tom worked as a Credit Analyst at checkmyfile until 2015

Tesco, the world’s third largest retailer, has posted record losses of £6.38bn for the last financial year, the worst results in its 96 year history and the UK’s biggest-ever retail loss. The loss is a huge contrast to the £2.26bn that the company made the year before.

The majority of the loss came from a fall in the property value of its stores, equating to roughly £4.7bn. The company has a large amount of stores, particularly large out of town units which haven’t been so profitable in recent years as trends in consumer shopping habits have changed reflecting the tough economic environment. As footfall in Tesco’s larger stores has decreased, the firm has acknowledged that the value of its property portfolio has also decreased.

In January, Tesco announced plans to close 47 of its least profitable stores and cancel plans to open 43 more.

The charges announced by Tesco relate to asset write downs, as opposed to sales at its stores which, although not as strong as in previous years, amounted to £1.4bn in the last financial year. This means that the firm’s stores are, overall, still operating at a profit.

Dave Lewis, Chief Executive of Tesco, said, "We sought to draw a line under the past and rebuild from here," continuing: "There are some encouraging signs that what we're doing is the right thing but we're very much at the beginning of a journey”.

Tesco has recently lowered prices across its range, whilst also focusing on improving customer service. Early reports suggest this is having a positive impact on the business, boosting recent trading.

Tesco still takes £1 in every £3 spent in UK supermarkets and still controls 28.7% of the grocery market share. Its nearest rival, Asda, controls 17% of the market, with Sainsburys close behind at 16.8%.

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