Tesco 2015 results report a £6.4 billion loss

By Erin Smith

Published: 22 April, 2015

Tesco has reported the worst annual financial results in the retailer's 96 year history, showing a loss of £6.376bn and underlying profit before tax fall just over 70% for the year.

Davis Lewis the chief executive for Tesco said it had been a "very difficult year" for Tesco. "The results we have published today reflect a deterioration in the market and, more significantly, an erosion of our competitiveness over recent years," he said.

The figures reflect the 53 weeks ending in 28 February 2015.

Part of the losses Tesco suffered were the result of an impairment charge of £5.605 bn which was driven primarily by a one-time property charge of £4.7 bn.

Lewis warned that the on-going challenges Tesco faces are most likely to continue into the near future as the market will remain uncertain for some time. He said: "The market is still challenging and we are not expecting any let up in the months ahead. When you add to this the fundamental changes we are making to our business and our offer, it is likely to lead to an increased level of volatility in short-term performance."

Ken Odeluga, a senior market analyst at www.cityindex.co.uk, said: "Tesco's final 2014 results are chuck full of toxic impairments, write-offs and other detritus that has been held on its balance sheet, sometimes for years."

Profits for the UK were hit the hardest, showing a 78.8% drop, coming in at £476m. Group trading profit overall was down 58.2% for 2015. However, despite the downward pressure on profits, profits beat market expectations signalling the retailer could be at a turning point.

"It is worth remembering that whilst the press will seize on the eye-watering record loss of £6.4bn, the outcome is broadly in line with market expectations and also includes a number of deliberate exits by the firm, aimed at paving the way to full implementation of its turnaround plan," Odeluga argued. "Tesco did in fact make a bigger trading profit than the market believed was possible (£1.4bn vs. £760.86m consensus)."

Further changes and cost-savings are expected in the near future as Lewis confirmed Tesco will continue to focus on three key priorities in the coming year. He outlined these as regaining competitiveness in the UK business; protecting and strengthening the balance sheet; and rebuilding trust and transparency in the business and the brand.

"We are already making good progress on our initiatives and on the basis of actions already undertaken they will deliver significant cost savings in 2015/16." Lewis said. "The immediate priority for these and any other savings delivered is reinvestment in the customer offer in order to further restore UK competitiveness."

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