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Tesco sees multichannel progress despite falls in overall sales and profits

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Tesco , today reporting dramatic falls in sales and profits, nonetheless continued to make progress in its multichannel operations.

UK online sales grew by 11% while convenience store like-for-like sales were up by 0.8%. The two divisions are part of Tesco’s multichannel strategy to enable customers to shop where and when is most convenient.

The update came as total sales of £34bn were reported in the half year to August 23, 4.4% down on the same time last year. UK like-for-like sales fell by 4.6%.

Pre-tax profits of £112m were 91.9% down, after a write-down of £527m associated with a previous mis-statement of profit expectations. UK trading profit of £937m was some 41% down.

The company said it would now focus on competitiveness as it moved on from the financial investigation that has overshadowed its performance in recent weeks. The investigation has found that profit expectations were overstated by some £263m in total, of which £118m applied to the first half of this year. The overstatement came as commercial income was reported early while recognition of costs in the UK food business was delayed.

Dave Lewis, chief executive, said: “Our business is operating in challenging times. Trading conditions are tough and our underlying profitability is under pressure.

“We do however face these challenges from a position of market strength and I have been heartened by the team’s welcome and their determination to stay focused on doing the very best for our customers.

“Whilst my review of the whole business continues, three immediate priorities are clear: to recover our competitiveness in the UK, to protect and strengthen our balance sheet and to begin the long journey back to building trust and transparency into our business and brand.”

Commenting on the figures, Bryan Roberts, director of retail insights at Kantar Retail, said unsurprising figures showed that Tesco’s strengths lay in online and convenience.

“Naïve hopes that the flamboyant accounting practices were limited to a six month period have been scotched, hinting at a systematic and long-term breach of standard practice in terms of accounting for supplier rebates and promotional monies,” he said. “Around the massive clouds that engulf Cheshunt, there are a few tantalising glimpses of silver lining.

“A strong position in online and convenience remain Tesco’s structural strength in the UK and the turnaround in select Eastern European markets appears to be on track. Many unknowns, understandable given the short duration of Dave Lewis’ tenure, remain. There will inevitably be some spin-offs and disposals to restore focus and generate funds and we also await some guidance in early 2015 on what the strategy will be to reinvigorate the UK business. Arguably, the only way is up.”

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