Every little helps … Tesco reports £162m profit as sales start to grow

THE boss of Tesco today declared the end of the worst crisis in its history as it revealed sales in Britain are growing for the first time in three years.

Chief executive Dave Lewis — whose first year in the job was dominated by a huge fall into the red and the aftermath of a £362 million accounting scandal — said: “We feel we have stabilised the business and are no longer in the crisis we were 16 months ago.”

A statutory profit of £162 million for the year to February 27 marked a return to the black, while UK like-for-like sales inched up 0.9 per cent in the fourth quarter. Mr Lewis said: “We have made significant progress against the priorities we set out in October 2014.

“We’ve regained competitiveness in the UK with significantly better service, simpler range, record levels of availability and lower, more stable prices.

“We were in a difficult place 16 months ago. We are] seeing good progress everywhere but there is much, much more to do. The market remains challenging, deflationary and uncertain.”

After he was headhunted from Unilever in 2014 to replace sacked Tesco boss Phil i p Clarke, Mr L ewi s was plunged into one of Britain’s most spectacular corporate meltdowns.

The discovery of the accounting black hole led to a share price plunge and was followed by a record £6.4 billion loss announced a year ago. Tesco also faced new, cheaper, rivals such as Lidl and Aldi at a time when food prices were falling. A typical basket of Tesco goods is four per cent cheaper than a year ago, down from £46.98 to £44.73.

The threat of a big fine after the completion of a Serious Fraud Office inquiry into the accounts shortfall hangs over Britain’s biggest retailer. One estimate suggests this could total £500 million

THE City today turned on Tesco as the supermarket giant’s chief executive warned its nascent recovery could prove to be a bumpy ride.

Dave Lewis, who began a turnaround of the group in 2014, said the business ha d “st a b i l i s e d” b ut “th e market remains challenging, deflationary and uncertain”.

There was no profit forecast for its current financial year, with Lewis (pictured) saying only there would be “continued improvement in profitability”.

“Recovery in Tesco will not be the smooth line some of us might like to draw and we are tryingng to guide the market thatt that’s how we see it,” he said. “It’s a turnaround situation so it ’s mo r e uncertain that it would be at another time.”

Tesco shares at one pointt dropped nearly 5% on the back of the cautious outlook, as well as some profit-taking on a near30% rally since the start of the year. They were down 7.2p at 189.1p despite a return to profit in Tesco’s year ended in February.

Statutory profit was £162 million — a far cry from 2015’s £6.3 billion loss, the biggest-ever on Britain’s High Street.

The group’s operating profit before exceptional items was up by 1.1% at £944 million, ahead of the expected £932 million.

More significantly, quarterly, samestore sales grew for the first time in three years, climbing 0.9% in the UK and 1.6% overall during the quarter which i ncl uded t he al l - i mpor t a nt Christmas period.

Lewis — who was parachuted in to turn the grocer around amid sliding profits and quickly discovered a £263 million accounting scandal in 2014 — has so far shut 60 underperforming stores, cut a quarter of “office” roles and sold off unwanted assets such as Korean business Homeplus.

Like his rivals, Lewis has also invested heavily in price reductions to compete with rapidly growing discounters Aldi and Lidl. The average basket of goods from Tesco now costs £44.76, 4% less than it did in August 2014. Under the ggrorouup’s new “farm” brands, pp rro du c t s a re a l most 2 0 % ccheaper than the items they replaced, the Tesco boss said. “In the first year of our transformation we’ve achieved or exceeded what we set out to do… but we aare really clear that there is mumuch, much more we want to do,” he added. Lewis would not be drawn on the rumoured sales of other assets like garden-centre chain Dobbies or the Giraffe restaurant business, but said that further investment was in the pipeline.

Analysts welcomed the update, with Shore Capit al’s Clive Black saying that the group had taken “material steps forward”.

Institutional investors also seemed satisfied. Henderson’s Laura Foll said: “The turnaround was never going to be quick or particularly smooth, but I think it’s going as well as we could have hoped for at this stage.”