Tesco expected to report first profit fall

16th Apr 2013 09:53

Tesco will report its first fall in underlying annual profits in two decades on Wednesday, according to analysts. The British retailer is expected to announce an underlying pre-tax profit of £3.5bn in the year to end of February 2013, a 10.7% decline from the £3.92bn reported the previous year, Vuma Consensus said. The drop reflects the cost of restructuring which was launched after the supermarket issued a profit warning in January 2012. The £1.0bn plan includes more employees, refurbished stores, revamped food ranges and price initiatives. It aims at reversing years of underinvestment and turning around a loss of market share to rivals like Sainsbury and Wal-Mart's Asda.Tesco, the world's third largest retailer after Wal-Mart and Carrefour, has also been affected by the Eurozone debt crisis, regulatory difficulties in South Korea and losses at its Fresh & Easy business. The grocer was expected to exit from the California-based venture which would alter results. A statutory pre-tax profit fall would be greater than the underlying decline if the company includes a substantial asset write-off for quitting the business.Analysts forecast closure of Fresh & Easy, followed by a disposal of saleable assets. A writedown of the last reported book value of the business would come to about £1.0bn. Broker Shore Capital estimates an additional £250m in store leases and staff redundancy costs.Nevertheless, Tesco's Chief Executive - Philip Clarke - has said the company was back on track with underlying sales growth of 1.8% for the six weeks to January 5th, its highest in three years.The group is anticipated to reveal like-for-like sales growth of zero to 0.5% for the fourth quarter, following a Europe-wide scandal over the discovery of traces of horsemeat in beef products.Tesco was among a string of retailers forced to withdraw products from its shelves. It is expected to pay a 2012-13 dividend of 14.68p, slightly down from 14.76p in 2011-12.RD