Tesco Profits Expected to Hit 10 Year Low
By Eric Anderson
Tesco will report its first fall in annual pre-tax profits for more than a decade and reveal whether it will scrap its Fresh & Easy banner, which has struggled in the U.S. market.
Analysts forecast that full-year profits before tax will dip 10% from $5.8 billion to $5.2 billion –the lowest in 10 years- due to weak sales in the UK, according to the Express.
Philip Dorgan, analyst at Panmure Gordon, said: “Pre-tax profits will be down by nearly 10 per cent. What is important is that Tesco UK, which accounts for 60 per cent of group profits, is on the road to recovery and management’s blueprint for the future has enough in it to suggest that it will emerge as a winner.”
Tesco issued a shock profit warning over a year ago. Following the issuance, Chief Executive Philip Clarke announced a $1.53 billion UK recovery plan that has yielded positive results.
A UK Price Promise initiative is intended to spearhead the recovery, with a price matching guarantee. Another effort included the $76 million acquisition of the Giraffe restaurant chain.
The results of the company’s Fresh & Easy strategic review, announced in December, will be addressed this week as well. The banner has accumulated losses of roughly $1.3 billion and drained $1.53 billion in capital.
Dorgan said: “There will be write-down’s, more than £1 billion if the US is to be closed.”
It is understood that a number of rivals are considering swooping for the assets. It has been reported that Walmart, the US arm of Aldi and supermarket Trader Joe’s have expressed an interest in parts of Tesco’s estate.
