Tesco profits drop 12.4% but Everyday Value boost sales

Tesco has posted a 12.4% fall in UK trading profits to £1.12bn for the half year to 26 August, but has returned to like-for-like sales growth after seven quarters, as customers turned to the rebranded Everyday Value range.

Tesco: rebranded Everyday Value range cited as helping to boost sales
Tesco: rebranded Everyday Value range cited as helping to boost sales

UK profits fell 12.4%, or £158m, to £1.1bn in the 26 weeks to 26 August, compared with a group trading profit fall of 10.5% to £1.6bn.

Philip Clarke, chief executive of Tesco, defended the drop in profits on BBC Radio 4's ' Today' programme this morning (3 October), saying that  "bringing in 8,000 new employees doesn't come for free".

Clarke has staffed up to improve customers' store experience, which had previously been neglected while Tesco focused on international expansion.

A Tesco statement claimed "consumer confidence remains at very low levels", while customers were increasingly turning to its rebranded value range.

Clarke claimed the Everyday Value range was up 10% in terms of like-for-like sales (Tesco has clarified he was referring to the half year comparison), but the sales increase was aided by Tesco introducing more than 550 new lines to the rebranded range after launching it on 4 April.

The supermarket's grocery online business continues to outperform with growth of 11% in the UK, while the business is increasingly focusing on its Dunnhumby data business to better target its customers.

Clarke said: "We have been hard at work and I am encouraged by our customers' initial responses to the changes we have made – but there is much more to be done.

"We have made some important strategic changes. First, significantly reducing space growth in the UK and focusing on improving the performance of our existing stores, and second, investing in online to enable Tesco to take a leadership role in the digital revolution – playing our part in shaping the future of retailing."

Tesco has also revealed it has tasked new ad agency Weiden & Kennedy to work on a new marketing campaign that will launch before the end of the year, as it seeks to complete its turnaround.

At the same time last year, Tesco launched its 'Big Price Drop' campaign that was criticised by many industry observers and failed to prevent the company recording its first drop in profits in 20 years.