Posts tagged "Tesco"

Wine: what to buy at Tesco

With 25% of the UK market, it has something for everyone

It would be easy to assume from the adverse publicity it attracts that Tesco is the last place on earth any sensitive soul would choose to buy wine. But given that it has 25% of the UK market, one in four of us is likely to be shopping there at any one time.

I have well-rehearsed issues with the company myself – the way it bumps up prices to create phoney half-price offers, though it’s far from alone in that; the pressure it puts on its suppliers; the fact that the wines I’m most enthusiastic about are often available in only a minority of its 3,000-plus stores. But – and it’s a big but – nearly 1.2 million people ”like” Tesco on Facebook (gah!), of whom 693 appear to have enjoyed a recent online Q&A about wine. (By way of comparison, fewer than 700,000 people follow rival Sainsbury’s page.)

Tesco also has something for everyone, from genuinely decent sub-£5 reds to bordeaux first growths, as I was reminded at a recent tasting. The robust, rustic Tesco Corbières (13% abv) and generous Tesco Simply Garnacha 2012 (1,492 branches; 13.5% abv) are both fantastic value at £4.59, though I’d probably lean towards the garnacha, because it comes from a specific vintage. Both would be perfect for barbecues.

The Tesco Finest range – often on promotion – is good value, too. At the moment you can buy the rich, citrussy Finest Tapiwey Sauvignon Blanc (12.5% abv), from Chile’s Casablanca Valley, on a two-for-£12 offer instead of the normal £8.99. Go for the 2012 if you can, rather than the 2011.

And the store’s 2009 bordeaux offer is a good way of getting your hands on a great vintage without having to take out a mortgage. You can buy a single bottle of Château Tour de Bessan 2009 (13.5% abv), a beautifully balanced, supple margaux, for £19.99 in the 127 branches that carry a Fine Wine selection (ring 0800 505 555 to find out your nearest), but be aware that you might be able to do better with the online deals. The elegant, graceful Château Sociando-Mallet 2009 (13.5% abv), for example, which Tesco is selling for £195 duty-paid for a case of six, is more than you would pay at Stourbridge-based Nickolls and Perks, which has it at £182.40 a half-case – though admittedly plenty charge quite a bit more. If you’re buying online, I’d always check wine-searcher.com, or simply ask your local wine merchant what they could get it for.

matchingfoodandwine.com

Photographs: Michael Whitaker for the Guardian

Tesco cuts price of ‘unlimited’ broadband to £2 a month

To get the service, customers will have to take the supermarket group’s line rental at £14.90 for a minimum of 12 months

Tesco has cut the price of its unlimited broadband to just £2 a month, which the supermarket chain claims is the cheapest unlimited broadband that doesn’t involve paying for an additional service.

To get the “unlimited” broadband service, which also includes free evening and weekend calls, customers have to take Tesco line rental at £14.90 a month for a minimum 12 months. They do not, however, have to sign up for a TV or mobile package.

Tesco customers will also receive one Clubcard point for every £1 spent and benefit from a UK call centre offering free technical support.

The deal is only available in the areas covered by its network, which represents 70% of UK households.

The unlimited offering comes with a fair use policy, which the company said would not affect anyone but the heaviest of downloaders.

It also said that those switching to its service could leave within the first three months without penalty under the terms of its “happiness promise”. Tesco Mobile customers are eligible for free Tesco broadband for 12 months.

The move is the latest in what is becoming an increasingly frenzied broadband market.

On Thursday, BT sent shock waves through its rivals when it announced it would offer its new sports channels – complete with Premier League football – for free to anyone taking its broadband offer. It has various deals on offer and will be tempting to sports fans.

TalkTalk has a half-price broadband offer (£3.25 a month plus for £14.95 landline rental). Sky has a similar offering too, while Virgin’s superfast service is currently offering half price broadband for six months.

Customers looking to switch should now get a home phone, unlimited broadband and all day calls for around £23 a month. If you are paying significantly more than that now could be the time start looking around, although you can expect some further price changes from rivals in the coming months.

A Tesco broadband spokesperson said: “Slashing our broadband prices again this year means that for just £2 a month British families can download music, play games online and stream films to their hearts’ content.”

Before you sign, check the speed you will get using the availability checker on its website. The offer is open until 30 June.

• You can compare phone, TV and broadband packages using the Guardian digital comparison service

UK’s top companies condemned for prolific use of tax havens

• Only two of FTSE 100 have no subsidiaries in havens
• Big four banks and Tesco among biggest users
• ActionAid findings described as shaming by Lib Dem peer

The UK’s 100 biggest public companies are running more than 8,000 subsidiaries or joint ventures in onshore and offshore tax havens, according to research published on Monday, raising fresh concerns about the full extent of corporate tax avoidance.

The figures, published by the charity ActionAid, show that only two of the companies listed on the UK’s FTSE 100 have no subsidiaries in tax havens – while companies such as Barclays and Tesco own hundreds.

Corporate use of offshore subsidiaries has been roundly criticised by tax campaigners as a tactic to legally reduce corporate tax bills, with Vodafone, Starbucks and Amazon attracting widespread protests and criticism from MPs.

David Cameron has pledged to put tackling the issue of tax avoidance and offshore secrecy at the heart of next month’s G8 summit, which Britain chairs this year.

Speaking after Saturday’s meeting of F7 finance ministers, the chancellor, George Osborne, said international action was needed, adding it was “incredibly important that companies and individuals pay the tax that is due”.

However, many of the offshore jurisdictions used by the FTSE 100 have close ties to the UK, illustrating the challenge facing Cameron and Osborne ahead of negotiations with other G8 leaders.

In total, FTSE 100 companies have 1,685 subsidiaries in UK Crown dependencies such as Jersey, or overseas territories such as the British Virgin Islands (BVI), Bermuda and Gibraltar.

The Treasury recently secured a deal to share more information on potential income-tax evaders operating out of British overseas territories. But campaigners warn that agreements so far do little to tackle offshore corporate secrecy and structures.

The research also compiled data covered by a wider definition of tax haven, including onshore jurisdictions such as the US state of Delaware – accused by the Cayman islands of playing “faster and looser” even than offshore jurisdictions – and the Republic of Ireland, which has come under sustained pressure from other EU states to reform its own low-tax, light-tough, regulatory environment.

By this measure, the UK’s biggest public companies keep a total of 8,311 subsidiaries in tax havens – more than one in three of all the FTSE100′s 22,042 foreign subsidiaries, associates and joint ventures.

The figures show that banks are the most prolific user of havens with the big four – Barclays, HSBC, the Royal Bank of Scotland, and Lloyds – among the top 10.

Barclays said in 2011 it was working to cut the number of its offshore subsidiaries in the Caymans, but the research shows it still had more than 120 subsidiaries in the Caribbean territory, along with dozens of others in other overseas jurisdictions with low tax rates or limited disclosure rules to other tax authorities.

Lord Oakeshott, the Liberal Democrat peer, who resigned as the party’s Treasury spokesman after criticising the government’s deal on banking regulation as “pitiful”, said the research showed new measures on tax havens were needed.

He said: “Tax transparency must start at home. ActionAid’s devastating research makes us ashamed to be British. Far too many of Britain’s top companies wash billions of profits through pipelines of British tax havens to vanish behind shiny brass plates in shady places.

“Cameron and Osborne can’t strut the world stage as fair tax crusaders until they end this tax abuse, starting with the banks we own, RBS and Lloyds.”

But use of offshore jurisdictions extends far beyond the banking world. Food manufacturers, retailers, and drinks firms were among the FTSE 100 companies using offshore jurisdictions.

The retailer with the most subsidiaries in countries dubbed tax havens was Tesco, which had 107, often tied to its financial services provisions. These included eight firms based in Jersey, nine in the BVI, and 14 in the Cayman Islands.

Particular concern is expressed by campaigners about the cost of offshore tax deals to the populations of developing countries.

For instance, Tullow Oil, which describes itself as “Africa’s leading independent oil company” draws 84% of its revenues from the continent, but only four of the 81 companies it lists as subsidiaries are registered in African countries. By contrast, more than half (47) are registered in tax havens including the BVI, St Lucia, the Channel Islands and Netherlands.

Three-quarters of these tax haven companies refer to developing countries, such as Liberia, Kenya, Malawi and Sierra Leone, in their names.

While the countries highlighted by the ActionAid study have been targeted because of their rules on secrecy or tax management, a company’s presence in such countries does not mean they are necessarily engaging in such practices.

There is no suggestion that any of the FTSE 100 firms have engaged in practices in contravention of tax laws.

Mike Lewis, ActionAid’s tax justice policy adviser, who did the research, called tax havens “one of the biggest hidden obstacles” in the fight against global poverty.

He added: “Poor countries lose three times more money to tax havens than they receive in aid each year. .

“Tax haven structures are almost universal amongst the UK’s biggest multinationals and becoming ever more common for investments in developing countries.

“When David Cameron chairs the G8 summit in Northern Ireland next month he must deliver on his promise to call time on tax havens for the benefit of all countries, rich and poor.”

The two FTSE 100 companies found to have no subsidiaries in tax havens were the mining group Fresnillo and the financial advice business Hargreaves Lansdown.

A spokesperson for Tullow Oil said the company did not avoid tax and did not use companies in tax havens to avoid tax, adding: “Our clear aim in tax planning is to ensure that the appropriate amount of tax is paid in the jurisdiction in which the activities are undertaken.

“As such, no country in which we operate is losing out because some of the companies that we own are located in tax havens.”

Seven of its subsidiaries were dormant with no profits and were scheduled for elimination while five were holding companies with minimal activity, he added.

A Barclays spokesperson said the company was among the UK’s top taxpayers and acted ethically.

She said: “This story is based on misconception and is misleading. Delaware is not a low-tax jurisdiction. Profits in the state are subject to US corporate tax at 35%, as well as Delaware state tax.

“Barclays has substantial businesses in many of the jurisdictions mentioned.

“In the Caymans virtually all of the profits generated in these companies are subject to corporate tax at the UK corporate tax rate. “The number of Barclays’ entities in low-tax jurisdictions reduced from 339 in 2009 to 252 by February 2013 – a 26% reduction. We plan to make further reductions in 2013.”

A Tesco spokesperson said: “We are one of the largest payers of tax in the UK. In the year ended February 2012 we contributed £1.5bn directly, including £519m in corporation tax. We do have a number of companies within low-tax jurisdictions, but these are all either holding companies, dormant, registered for UK tax, or subject to controlled foreign company regulations and agreed with HMRC.”

While measures have been taken already to crack down on the separate issue of tax avoidance by individuals, campaigners have repeatedly said that without steps to tackle corporate activities in havens action will be futile.

UK’s top companies condemned for prolific use of tax havens

• Only two of FTSE 100 have no subsidiaries in havens
• Big four banks and Tesco among biggest users
• ActionAid findings described as shaming by Lib Dem peer

The UK’s 100 biggest public companies are running more than 8,000 subsidiaries or joint ventures in onshore and offshore tax havens, according to research published on Monday, raising fresh concerns about the full extent of corporate tax avoidance.

The figures, published by the charity ActionAid, show that only two of the companies listed on the UK’s FTSE 100 have no subsidiaries in tax havens – while companies such as Barclays and Tesco own hundreds.

Corporate use of offshore subsidiaries has been roundly criticised by tax campaigners as a tactic to legally reduce corporate tax bills, with Vodafone, Starbucks and Amazon attracting widespread protests and criticism from MPs.

David Cameron has pledged to put tackling the issue of tax avoidance and offshore secrecy at the heart of next month’s G8 summit, which Britain chairs this year.

Speaking after Saturday’s meeting of F7 finance ministers, the chancellor, George Osborne, said international action was needed, adding it was “incredibly important that companies and individuals pay the tax that is due”.

However, many of the offshore jurisdictions used by the FTSE 100 have close ties to the UK, illustrating the challenge facing Cameron and Osborne ahead of negotiations with other G8 leaders.

In total, FTSE 100 companies have 1,685 subsidiaries in UK Crown dependencies such as Jersey, or overseas territories such as the British Virgin Islands (BVI), Bermuda and Gibraltar.

The Treasury recently secured a deal to share more information on potential income-tax evaders operating out of British overseas territories. But campaigners warn that agreements so far do little to tackle offshore corporate secrecy and structures.

The research also compiled data covered by a wider definition of tax haven, including onshore jurisdictions such as the US state of Delaware – accused by the Cayman islands of playing “faster and looser” even than offshore jurisdictions – and the Republic of Ireland, which has come under sustained pressure from other EU states to reform its own low-tax, light-tough, regulatory environment.

By this measure, the UK’s biggest public companies keep a total of 8,311 subsidiaries in tax havens – more than one in three of all the FTSE100′s 22,042 foreign subsidiaries, associates and joint ventures.

The figures show that banks are the most prolific user of havens with the big four – Barclays, HSBC, the Royal Bank of Scotland, and Lloyds – among the top 10.

Barclays said in 2011 it was working to cut the number of its offshore subsidiaries in the Caymans, but the research shows it still had more than 120 subsidiaries in the Caribbean territory, along with dozens of others in other overseas jurisdictions with low tax rates or limited disclosure rules to other tax authorities.

Lord Oakeshott, the Liberal Democrat peer, who resigned as the party’s Treasury spokesman after criticising the government’s deal on banking regulation as “pitiful”, said the research showed new measures on tax havens were needed.

He said: “Tax transparency must start at home. ActionAid’s devastating research makes us ashamed to be British. Far too many of Britain’s top companies wash billions of profits through pipelines of British tax havens to vanish behind shiny brass plates in shady places.

“Cameron and Osborne can’t strut the world stage as fair tax crusaders until they end this tax abuse, starting with the banks we own, RBS and Lloyds.”

But use of offshore jurisdictions extends far beyond the banking world. Food manufacturers, retailers, and drinks firms were among the FTSE 100 companies using offshore jurisdictions.

The retailer with the most subsidiaries in countries dubbed tax havens was Tesco, which had 107, often tied to its financial services provisions. These included eight firms based in Jersey, nine in the BVI, and 14 in the Cayman Islands.

Particular concern is expressed by campaigners about the cost of offshore tax deals to the populations of developing countries.

For instance, Tullow Oil, which describes itself as “Africa’s leading independent oil company” draws 84% of its revenues from the continent, but only four of the 81 companies it lists as subsidiaries are registered in African countries. By contrast, more than half (47) are registered in tax havens including the BVI, St Lucia, the Channel Islands and Netherlands.

Three-quarters of these tax haven companies refer to developing countries, such as Liberia, Kenya, Malawi and Sierra Leone, in their names.

While the countries highlighted by the ActionAid study have been targeted because of their rules on secrecy or tax management, a company’s presence in such countries does not mean they are necessarily engaging in such practices.

There is no suggestion that any of the FTSE 100 firms have engaged in practices in contravention of tax laws.

Mike Lewis, ActionAid’s tax justice policy adviser, who did the research, called tax havens “one of the biggest hidden obstacles” in the fight against global poverty.

He added: “Poor countries lose three times more money to tax havens than they receive in aid each year. .

“Tax haven structures are almost universal amongst the UK’s biggest multinationals and becoming ever more common for investments in developing countries.

“When David Cameron chairs the G8 summit in Northern Ireland next month he must deliver on his promise to call time on tax havens for the benefit of all countries, rich and poor.”

The two FTSE 100 companies found to have no subsidiaries in tax havens were the mining group Fresnillo and the financial advice business Hargreaves Lansdown.

A spokesperson for Tullow Oil said the company did not avoid tax and did not use companies in tax havens to avoid tax, adding: “Our clear aim in tax planning is to ensure that the appropriate amount of tax is paid in the jurisdiction in which the activities are undertaken.

“As such, no country in which we operate is losing out because some of the companies that we own are located in tax havens.”

Seven of its subsidiaries were dormant with no profits and were scheduled for elimination while five were holding companies with minimal activity, he added.

A Barclays spokesperson said the company was among the UK’s top taxpayers and acted ethically.

She said: “This story is based on misconception and is misleading. Delaware is not a low-tax jurisdiction. Profits in the state are subject to US corporate tax at 35%, as well as Delaware state tax.

“Barclays has substantial businesses in many of the jurisdictions mentioned.

“In the Caymans virtually all of the profits generated in these companies are subject to corporate tax at the UK corporate tax rate. “The number of Barclays’ entities in low-tax jurisdictions reduced from 339 in 2009 to 252 by February 2013 – a 26% reduction. We plan to make further reductions in 2013.”

A Tesco spokesperson said: “We are one of the largest payers of tax in the UK. In the year ended February 2012 we contributed £1.5bn directly, including £519m in corporation tax. We do have a number of companies within low-tax jurisdictions, but these are all either holding companies, dormant, registered for UK tax, or subject to controlled foreign company regulations and agreed with HMRC.”

While measures have been taken already to crack down on the separate issue of tax avoidance by individuals, campaigners have repeatedly said that without steps to tackle corporate activities in havens action will be futile.

Tesco backtracks on labelling chemistry set as boys’ toy

Gender labels on Tesco’s toys to be reviewed after storm of criticism from shoppers and equality groups

The row over gender-specific toys has taken a new turn after Tesco admitted its description of a children’s chemistry set as for boys was incorrect, and launched a wider review of the way toys are labelled on its website.

Tesco had initially defended its decision to label the item, manufactured by John Adams, as a boys’ toy on its website following a storm of criticism from shoppers and gender equality groups.

Campaigners from Let Toys Be Toys, an online pressure group urging retailers not to limit children’s social development by promoting “boys” and “girls” toys rather than putting them under a “unisex” label, claimed that Tesco’s labelling of the Action Science chemistry set was sexist.

Tesco had justified the move by saying on Twitter: “Toy signage is currently based on research and how our customers tell us they like to shop in our stores”, adding that further research would be commissioned later in the year to provide “an up-to-date reflection of customers’ thinking”.

But a Let Toys Be Toys spokesman challenged Tesco’s position, tweeting: “Can you imagine if we took yr approach in schools: that science was just for boys & we shouldn’t bother teaching it to girls?”

On 7 May Tesco appeared to have backtracked after shopper Sara Williams published an apologetic email sent to her by Nikki Curran of Tesco Direct Customer Services, which said the description of the chemistry set was “incorrect”.

Curran said the company was updating its website “to show the item as being unisex” and reassured Williams that “it is never our intention to cause any upset and it is always a matter of regret when one of our customers remains dissatisfied”.

The toys Tesco sells in its stores are not labelled according to gender, but they are online once shoppers carry out a more in-depth product search.

The latest development comes amid growing shopper sensitivity over retailers’ traditional policy of advertising separate boys’ and girls’ toys.

Boots recently admitted it was wrong to use separate in-store signs labelling girls’ and boys’ toys – putting Science Museum-brand toys in the latter category – after shoppers took to Twitter and Facebook to accuse the retailer of sexism. In a statement posted on Facebook it said it was taking steps to remove the signs and was dismayed by customers’ reaction.

Tesco’s era of rolling out its aisles is over, for now

The supermarket empire will strike back. But after a fall in profits and retreat from the US, it will have to be more cautious

The shocking part of Tesco’s £1bn loss on exiting its US Fresh & Easy business – really a loss of about £1.5bn in cash terms over the life of the adventure – is that management waited so long to admit defeat. Fresh & Easy was billed at launch, in 2007, as a low-risk way to test the US market. But weak initial results on the west coast did not lead to the obvious conclusion: that Tesco had got its homework wrong and made a bad bet.

The company rationalised failure as the temporary influence of recession, and made a few tweaks to the format such as fitting doors to fridges and softening the utilitarian look of the shops. But none of the changes suggested the business would achieve the hoped-for sales densities within a reasonable time horizon.

Sir Terry Leahy should have pulled the plug before he departed as chief executive in 2011; and it should have been the first act of his successor Philip Clarke. There was nothing wrong with the original idea of spending £250m to experiment – big international retailers have to take a few risks. The mistake was to lose the equivalent of 15 months worth of shareholders’ dividends.

The harder-to-measure cost of the misadventure is the effect on the rest of the company. Was it coincidence that Tesco UK went off the boil as the US pain was most intense? Probably not. The UK business, it now appears, was milked too hard to meet the City’s profit expectations in the face of US setbacks.

Clarke’s repair job amounts to a fundamental rethink, as evidenced by the hefty 8.3% decline, to £2.27bn, in UK trading profits. Tesco can point to high scores on customer approval ratings as its pours in £1bn of investment, but the open question is whether the old profit margins can be restored. Again, probably not.

Margins peaked at 6.2% in 2010; today, Tesco reported 5.2%. The difference doesn’t sound vast but when turnover is £43bn, a percentage point matters. The arrival of online shopping – which, with current delivery charges of £5, is painful for supermarkets – suggests Tesco will have to learn to live with lower margins.

Easy profits from property are also history. Official confirmation that the “space race” is over came in the form of an £804m writedown on the landbank. Not building new hypermarkets means fewer sale-and-leaseback transactions, and thus profits from property development in the UK will tail off to zero.

The non-US businesses are a mix of the good, the bad and the ugly. In the good camp are Korea, Thailand and Malaysia, where returns on capital employed are about 15%, close to UK levels. Eastern Europe, hit by recession, has fallen below 7%. And Turkey, China and India, the main development markets, are still recording losses.

The Chinese story is the most startling. In 2010, Tesco put a smoggy Chinese skyline on the front cover of its annual report under the title “a business for a new decade”. On current form, though, it won’t be this decade. Expansion plans have been reined in, like-for-like sales are going backwards, and Tesco grumbles about too much capital (foreign and local) chasing Chinese consumers.

Is this the end of the Tesco success story? No. The first fall in profits for two decades is a major event, but the empire is not about to crumble. Overall returns on capital – ignoring the US disaster, the UK property hit and other “one-offs”, such as the PPI mis-selling bill and the goodwill charge in eastern Europe – are still 12.7%. That’s a healthy base, and Clarke is promising 12-15% in future.

But the Leahy era of go-go expansion on all fronts is over. In Clarke’s world, capital allocation is paramount. It makes for duller, slower growth. But, after a year in which Tesco brought out all its dirty linen, that’s the only approach shareholders would tolerate.

Tesco boss hails end of ‘space race’ as profits crash

Chief executive Philip Clarke takes the knife to Tesco’s UK store expansion plans and confirms costly exit from US

Tesco boss Phil Clarke has put the brakes on the group’s UK expansion as he revealed a plunge of more than 50% in the grocer’s annual profits and brought the curtain down on its US Fresh & Easy chain in a move which will cost the retailer £1.2bn.

The huge fall in profits – largely as a result of £2.4bn in one-off charges at home and abroad – was the first decline at the UK’s biggest supermarket chain for more than two decades. But even without the one-offs underlying profit was down 14.5%.

Clarke is taking the knife to Tesco’s UK store expansion plans, slashing growth plans by nearly half. The era of rapid growth – known as the “space race” to open large supermarkets – must come to an end, he said, and attention must be focused on its convenience stores and online business.

The results detailed how 20 years of continuous growth have juddered to a halt as the retailer has run into problems in the UK and overseas. The UK chain has lost customers to rivals ranging from Waitrose to Aldi and has been forced to embark on a “Build a Better Tesco” revamp, trying to improve service, sharpen prices and improve stores. It international operations are also stuttering in many countries, with growth in China slower than expected, the South Korean chain hit by new rules on trading hours and European outlets affected by the the economic downturn.

In the UK, the total cost of scrapping town centre developments, store extensions, development projects and distributions centre closures will be £804m. Some 176 sites that would have been turned into superstores will no longer be developed.

The writedowns, which also included £115m set aside to cover claims for mis-sold payment protection insurance on Tesco loans, sent full year pretax profits down from £4bn to £1.96bn, on sales of £72.4bn worldwide. In the UK, sales were up by 1.8% to £48.2bn, but UK trading profit was down 8.3% to £2.27bn. Across the group underlying profit was down 14%.

“It’s very easy with hindsight to look back and say we could have done something different, but it’s taken us a good year to look hard and realise that investment was needed in the UK and to feel the way the internet is starting to change everything,” Clarke said.

Around 150 convenience stores are still expected to be opened over the coming year, and around 600 schemes are in the pipeline – mostly Tesco Express convenience stores. However, this is around 40% fewer than previously planned.

Around 110 schemes where Tesco has invested in land will not go ahead, including 16 that will cost the company around £300m to exit. Around 40 plots of land next to existing stores which bosses had hoped to expand in to will be sold.

The retailer has also taken a £70m hit from onerous leases, and distribution centre closures in Harlow and Weybridge cost £30m.

Seven town centre developments, where Tesco has bought part of a high street to develop, will be scrapped, and 23 stores have lost a significant chunk of their value because they were bought before the financial crisis.

However, Tesco still has a property portfolio of £20bn and overhauled 25% of its stores, in particular its meat, fish and bakery sections.

In the US, the disastrous Fresh & Easy venture is over at a cost of £1bn on writedown costs, and a further £200m of operating losses for the year. Some analysts have estimated the Fresh & Easy debacle will have cost Tesco around £3bn in total. The UK retailer had hoped to take on the mighty US Wal-Mart chain in its own backyards and build a chain of 1,000 stores on the US west coast, but the stores failed to attract enough shoppers.

Chief finance officer, Laurie McIlwee, said discussions are continuing in a hope to sell the business, with Germany’s Aldi and the US Trader Joe’s operation thought to be interested.

He said: “I’m pleased after such a short period of time we’ve attracted such a lot of interest.

“There are a large number of organisations that want to buy the entire Fresh & Easy company and it’s those businesses we are focusing our attentions on because plainly they will be the ones that will be more straightforward.

I think another three months we’ll be able to either give you an update or reveal a buyer.”

Clarke admitted the US business had been a disappointment.

He refused to blame Sir Terry Leahy for the retailer’s problems. He said he had been left a “great legacy” by his predecessor and added: “My job isn’t to look back and apportion blame to anybody but there are huge lessons for the organisation.”

On the failure of Fresh & Easy, which opened in 2007, he said: “We could have carried on for a few more years but it would have taken too long to get to profitability. I think the big lesson is when you can’t see a return in a reasonable time frame, as the chief executive it’s your responsibility to call an end to it and go spend your energy and invest your shareholders money in other things.”

Clarke blamed the PPI mis-selling on the bailed-out Royal Bank of Scotland, when Tesco Bank was part of a joint venture, but said the bill, which has now reached £222m, could not be passed on to RBS.

He added that they would be launching current accounts for the first time from next year – four years later than planned.

On the horsemeat scandal, which hit Tesco harder than most after horse DNA was found in four products including own-brand burgers and lasagne, Clarke said the impact on sales had been minimal.

He said: “It was a terrible thing and I never imagined for a minute that food would be subject to that type of fraud, so we took a bit of time to understand the scale of it.

“It wasn’t great because it knocked our confidence in ourselves for a while and it knocked consumer confidence as well more generally.”

Some analysts suggested the huge writedowns are an opportunity for Tesco to put the last year behind them and move forward.

Clive Black at Shore Capital said: “Mr. Clarke has had to go backwards to move forwards, reflecting to our minds a more challenged business and more challenging market conditions than his predecessors faced.

“To his credit though, he has not shirked difficult decisions that we believe have been necessary to right the ‘good ship’ Tesco.”

However, Andrew Kasoulis at Credit Suisse, cautioned: “They have been trying to clean things up since last January’s profit warning but events have conspired against them particularly in Europe.

“I wouldn’t guarantee that everything is completely resolved, but I think there has been remedial action in some areas, in particular the UK. They seem to have much more of an idea of what’s going right and what’s going wrong and been much more engaged with their customers.”

Tesco: what the analysts say

The supermarket group’s profits are down for the first time in 20 years on its exit from the US and an £800m UK property writedown. Here’s what City analysts make of the news

Clive Black at Shore Capital

Philip Clarke, the CEO of Tesco, may look back on the year to February 2013 with mixed feelings. Yes this was the year that margins in the core business in the UK contracted. Yes, this was the year that the group’s international “jewel”, South Korea, hit a brick wall of sorts in the local regulator, so delivering a body blow to Asian returns, and yes, Tesco has reported a material 12.7% reduction in group trading profits to £3.284bn.

However, these somewhat mellow headlines mask a year of considerable underlying progress for Mr Clarke and Tesco to our minds. Mr Clarke has had to go backwards to move forwards, reflecting a more challenged business and more challenging market conditions than his predecessors faced.

Philip Dorgan at Panmure Gordon

The decision to exit the US is not unexpected and the main focus of these results will therefore be upon the shift in strategy to focus on generating positive free cash flow. We think that this will be taken well by the market, especially as it signals the end of the space race in the UK. We believe that there are three prime drivers of shareholder value: UK recovery; lower capital expenditure and higher returns; and the online opportunity.

Caroline Gulliver at Espirito Santo

Overall we think Tesco’s strategy of transforming itself into a multichannel retailer is the right one, but the transition process away from being a hypermarket-led retailer will be painful and probably less profitable, both in the UK and internationally.

Bryan Roberts, retail insights director at Kantar Retail

While a lot of the headlines will be grabbed by the news on Fresh & Easy and by the ostensibly negative trend in profitability, we would argue that the decline in earnings is primarily a reflection of welcome and overdue investment in the core UK supermarket estate.

Tesco is painfully aware that its core offer in grocery has become off the pace, and improvements in store design, merchandising, private label and marketing tell us that Tesco is earnest in its desire to regain lost ground.

Phil Dorrell, director of retail consultants Retail Remedy

From day one, Fresh & Easy was an unmitigated disaster for Tesco. The retailer is retreating from the States with its tail firmly between its legs.

Tesco’s ignominious exit from the US will grab all the headlines but the truth is that even without the Fresh & Easy debacle the supermarket would probably still have seen its profits fall for the first time in 20 years.

The bottom line is this: Tesco took its eye off the ball in spectacular fashion and, in its goal to be a world-beater, forgot to take care of the basics.

John Pal, retailing expert at Manchester Business School

There are no surprises with the results in the US. What seemed like a good idea, that was seemingly well-researched, just hasn’t borne fruit. But this won’t kill the company as Tesco has a generally good record at entering overseas markets.

Sir Terry Leahy may be used as a convenient scapegoat for the failure to gain traction in the US, but now that all the bad news is out analysts will be keenly monitoring Philip Clarke’s strategy.

Ajay Bhalla at Cass Business School

The falling star of Tesco in the US is a harsh reminder that scale is not the recipe for sustainable value creation. For years, Tesco managers paid attention to perfecting the mix of supplier-driven cost efficiencies with low prices. While pursuing that mix, Tesco managers celebrated year-on-year growth and with much confidence ventured into the US market forgetting that the American retail landscape is a different ball game.

While Tesco paid attention to making its US venture work, the UK retail market evolved quickly. Customer service and quality gained the upper hand over low pricing, and Waitrose and Sainsbury’s emerged as the preferable destination for the growing middle-class segment.

Tesco’s exit from the US is a reminder for managers of the dangers of going blindly for scale and cost leaders, the wheels of which are difficult to reverse if you need to change course to becoming a retailer known for first-class customer experience.

Peter Saville, partner at advisory and restructuring firm Zolfo Cooper

Tesco misread the [US] market despite considerable research. By starting the Fresh & Easy venture from scratch, rather than acquiring an existing business, the subsidiary lacked efficiency and failed to capitalise on an existing presence.

When business ventures like this go wrong, it is important for retailers to act quickly by assessing which strategies or divisions of their business are no longer working and exiting before its too late.

Tesco’s turnaround plan is set to reshape its British hypermarket portfolio and revive its domestic business. The grocer’s recent decision to buy Giraffe is certainly a step in the right direction, along with its stake in coffee shop Harris + Hoole. By installing these outlets in its larger stores, Tesco will make more effective use of its vast floor space and become a more attractive destination for consumers.

Tesco profits down as it takes £1bn hit to quit US

Supermarket group’s profits fall for first time in 20 years on Fresh & Easy exit and £800m UK property writedown

Tesco, Britain’s biggest retailer, confirmed it will exit its loss-making business in the US, taking a £1bn writeoff that knocked its full-year profit down for the first time in two decades.

The group also wrote down the value of its property in Britain, by £804m, and took a writedown on its businesses in Poland, Czech Republic and Turkey of half a billion pounds.

The raft of announcements form part of Tesco’s fightback following a tough period for what was once one of Britain’s most consistently performing companies. Its full-year results also showed that growth in its core home market had slowed.

“The announcements made today are natural consequences of the strategic changes we first began over a year ago and which conclude today,” the chief executive, Philip Clarke, said. “I’ve been working for Tesco for nearly 40 years and I can tell you this – it already looks, feels and acts like a different and a better business.”

The world’s third-largest stores group said on Wednesday it made a pretax profit of £1.96bn in the year to 13 February, down 51.5%.

It also reported a 14.5% fall in underlying full-year profit, largely reflecting the cost of a turnaround plan for the UK market, launched after a shock profit warning in January last year.

Despite heavy investment, the group said fourth-quarter sales at British stores open over a year, excluding fuel and VAT sales tax, grew 0.5% – a slowdown from growth of 1.8% in the six weeks to 5 January.

That was, however, at the top end of a range of forecasts of 0-0.5% and the strongest quarterly growth for three years, the company said.

Tesco’s £1bn pound fightback plan for Britain focused on more staff, refurbished stores, revamped food ranges and price initiatives – all aimed at reversing years of under-investment and halting a loss of market share to rivals like Sainsbury’s and Asda.

As it reviewed the British business, the company also took a writedown of £804m on its property investments. The writedown on the operations in Poland, Czech Republic and Turkey hit half a billion pounds.

Tesco also said it had increased its provision to cover the possible mis-selling of insurance products at its Tesco Bank to £115m.

Earnings have also been hit by the impact of the eurozone debt crisis on eastern European markets, restrictions on store opening times in South Korea, and losses at the US business Fresh & Easy. It has decided to exit the US altogether.

Fresh & Easy, which trades from 199 stores and employs about 5,000 people, has absorbed more than £1bn of capital since its 2007 launch when Tesco was run by Clarke’s predecessor, Sir Terry Leahy, but has never turned a profit in a market where it competes with the likes of Trader Joe’s, Whole Foods Market and Wal-Mart.

“Tesco’s ignominious exit from the US will grab all the headlines but the truth is that even without the Fresh & Easy debacle the supermarket would probably still have seen its profits fall for the first time in 20 years,” said Phil Dorrell, director of retail consultants Retail Remedy. “Slowly, things are getting back on track in the UK. The question now is can Tesco sustain its newfound momentum and increase profits in a still challenging global climate? 2013 is shaping up to be a critical year.”

Clarke put the venture, which contributes just 1% of group turnover, under review in December, saying an exit was likely.

Tesco’s chief financial officer, Laurie McIlwee, said there was “a lot of interest” in Fresh & Easy, with possible suitors for the whole business or parcels of stores.

“What we’re most interested in is those buyers that are interested in buying the complete business that we have in the US,” he said, pointing out that a complete sale would remove redundancy and onerous leasehold issues.

He said Tesco would not conclude the process for at least another three months.

The group made an underlying pretax profit of £3.55bn. That compares with analysts’ consensus forecast of £3.5bn, according to a company poll, and with £3.92bn made in 2011/12.

Tesco takes £1bn hit as it quits US

Supermarket group’s profits fall for first time in 20 years on Fresh & Easy exit and £800m UK property writedown

Tesco, Britain’s biggest retailer, confirmed it will exit its loss-making business in the United States, taking a £1bn writeoff that knocked its full-year profit down for the first time in two decades.

The group also wrote down the value of its property in Britain, by £804m, and took a writedown on its businesses in Poland, Czech Republic and Turkey of half a billion pounds.

The raft of announcements form part of Tesco’s fightback following a tough period for what was once one of Britain’s most consistently performing companies. Its full-year results also showed that growth in its core home market had slowed.

“The announcements made today are natural consequences of the strategic changes we first began over a year ago and which conclude today,” chief executive Philip Clarke said.

The world’s third-largest stores group said on Wednesday it made a pretax profit of £1.96bn in the year to 13 February, down 51.5%.

It also reported a 14.5% fall in underlying full-year profit, largely reflecting the cost of a turnaround plan for the UK market, launched after a shock profit warning in January last year.

Despite heavy investment, the group said fourth-quarter sales at British stores open over a year, excluding fuel and VAT sales tax, grew 0.5% – a slowdown from growth of 1.8% in the six weeks to 5 January.

Tesco’s £1bn pound fightback plan for Britain focused on more staff, refurbished stores, revamped food ranges and price initiatives – all aimed at reversing years of under-investment and halting a loss of market share to rivals like Sainsbury’s and Asda.

Earnings have also been hit by the impact of the eurozone debt crisis on eastern European markets, restrictions on store opening times in South Korea, and losses at the US business Fresh & Easy. It has decided to exit the US altogether.

Fresh & Easy, which trades from 199 stores and employs around 5,000, has absorbed more than £1bn of capital since its 2007 launch when Tesco was run by Clarke’s predecessor, Sir Terry Leahy, but has never turned a profit in a market where it competes with the likes of Trader Joe’s, Whole Foods Market and Wal-Mart.

Clarke put the venture, which contributes just 1% of group turnover, under review in December, saying an exit was likely.

The group made an underlying pretax profit of £3.55bn. That compares to analysts’ consensus forecast of £3.5bn, according to a company poll, and with £3.92bn made in the 2011/12 year.