Tesco today said its first-half profits had more than halved but insisted its recovery was on track amid a slowdown in falling UK sales.
The UK’s biggest supermarket said like-for-like sales in the UK and Ireland were down 1.3 per cent compared with a year ago, but the trend was improving – sales fell 2 per cent in the final quarter of last year, and were down 1 per cent in the second quarter of 2015-16.
Tesco is seeking to recover from a disastrous year when it reported losses of £6.4 billion largely due to property writedowns in April, and the retailer has been embroiled in a scandal over an accounting black hole as large as £326 million. The Serious Fraud Office launched an investigation into its accounting practices in October last year.
Last month the group agreed to sell its Homeplus operation in South Korea to a group of investors for £4bn in cash, in a move it said would lead to a “significant reduction” in its debt pile.
Sales in the UK have come under pressure from the rising popularity of discount grocers Aldi and Lidl, and Tesco chief executive Dave Lewis said today that the market “remains challenging”.
He added: “We have delivered an unprecedented level of change in our business over the last 12 months and it is working. The first-half results show sustained improvement across a broad range of key indicators.
“In the UK, we continue to improve all aspects of our offer for customers, resulting in volume growth which is allowing us to create a virtuous circle of investment.”
However, group operating profits before one-off items tumbled to £354m for the first half, down from £779m a year earlier, and no interim dividend will be paid to shareholders.
Today’s results also showed that operating profits at the retailer’s Edinburgh-based Tesco Bank operating fell 13.1 per cent to £86m in the first half.