LONDON -- Tesco
The U.K.'s biggest supermarket chain has had a tough time this year dealing with boardroom changes, embarrassing pricing glitches, and a slowdown in consumer spending. In April, Tesco's full-year results showed a small increase in underlying pre-tax profits for the group to 3.9 billion pounds. It lifted its dividend by 2% to 14.7 pence per share and also announced a 1 billion pound commitment to "Building a Better Tesco" for U.K. customers.
At the time, Philip Clarke, Tesco's newly appointed chief executive, said:
While our International business is delivering excellent growth, contributing 1.1 billion pounds of profit to the Group, we fully recognise that we need to raise our game in the U.K. As a result, we are committing over 1 billion pounds to make the U.K. shopping trip better for customers: more staff giving improved service in-store; refreshed stores that are better and easier places to shop; lower prices and even more value from an improved product range. As we improve the shopping trip for our customers, it will follow that our sales growth and financial performance will improve too. … These are decisive steps and this cost investment -- as we have already announced -- will constrain our near-term profitability.
Then, in June, Tesco posted a solid Q1 in line with market expectations for the U.K. Internationally, like-for-like sales growth proved resilient despite slowing economic growth in China and the emerging impact of legislation that reduces shopping hours in South Korea.
In October, Tesco's half-year results reported its first fall in profits since 1994. Pre-tax profits for the six months to Aug. 25 were down 12% to 1.7 billion pounds. However, the interim dividend per share was held at 4.63 pence. Tesco's turnaround will take some time to bear fruit. But in the meantime, investors can take some comfort in the above-average 4.6% dividend yield.
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