Tesco chief digs in as profits slide

Tesco boss Philip Clarke gave a defiant “I’m staying put” message to critics today, despite the supermarket giant posting its second consecutive year of falling profits amid intense competition from discounters Aldi and Lidl.

Tesco is Britain's biggest retailer. Picture: Getty

The group has faced unease from some big shareholders that felt Clarke, who replaced Sir Terry Leahy in 2011, was not up to the job of fending off the competition.

But the Tesco chief executive, unveiling a fresh 6 per cent slide in trading profits to £3.3 billion, said: “I have got no intention of going anywhere. All my waking hours are spent in running Tesco. It’s what I love.” The further fall in profits followed a 14.5 per cent drop in the previous year.

Long-standing Tesco finance director Laurie McIlwee resigned this month, leaving Clarke the only executive director at Britain’s biggest grocer, but the former FD denied that it was because he disagreed with his boss’s strategy.

Clarke, who has launched a £1bn turnaround programme at the group, paid a grudging tribute to how the discounters had carved a strong position in the British food retailing market.

“They are very formidable. They have done a great job in the UK,” he said of Aldi and Lidl. Clarke announced £200 million of price cuts six weeks ago, but he admitted that Tesco could not compete with the discounters purely on price. “If you try and get lower than them on price they don’t let you,” he said, adding that Tesco also had to respond by differentiating its offer, citing fuel savings via its Clubcard.

Clarke said that further price cuts were in the pipeline, but declined to put a figure on them. However, he added that Tesco was vigilant on what competitors were doing, which has included Morrisons announcing £1bn of price promotions over the next three years.

Clarke said 650 more Tesco’s stores would be refurbished in the current financial year, and every customer would see their local store “refreshed” over the next three years.

Online grocery sales at the group lifted 11 per cent, while Tesco Express like-for-like sales were up 1.1 per cent. The dividend is held at 14.76p via a 10.13p final.

Tesco Bank, which employs 3,300 in Scotland, saw trading profit grow just under one-fifth to £194m despite having to boost its provision for payment protection insurance (PPI) mis-selling by £20m and take a further provision of £43m for customer redress.

To forestall any recurrence in what he said had been a banking industry-wide problem, Clarke said: “We don’t incentivise any of our front-line people on sales.”

He said a key milestone for Tesco Bank – launching current accounts – would be achieved over the next six months.