Tesco is pulling out of its loss-making Fresh & Easy business in the US at a cost of almost 1.2 billion euros for restructuring and other one-off payments.
At the same time Britain’s biggest retailer wrote down the value of its property in the UK by the equivalent of 933 million euros as it abandoned plans to develop more than 100 sites.
A sharp slowdown in demand at its businesses in Poland, the Czech Republic and Turkey accounted for a further 575 million euros writedown.
As a result Tesco’s annual profit fell for the first time in 20 years.
Though Chief Executive Philip Clarke hailed Tesco’s fourth quarter performance in its home market as its best quarterly outcome in three years, it still represented a slowdown in growth since Christmas, despite a year of huge investment.
“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,” Clarke told reporters.
“We’ve closed the gap in the (UK) market, at times we’ve outperformed it,” he said.
Industry watchers were not convinced. “Management cannot claim concrete evidence of a UK recovery with these numbers,” said Panmure Gordon analyst Philip Dorgan.
“It will take time – retail is detail – but we believe that Tesco is on track and we expect recovery in the UK to slowly emerge in FY2014,” he said, adding that Tesco could commence share buybacks in 2015.
Tesco’s fightback plan for Britain, where it makes over 60 percent of revenue and profit, has focused on more staff, refurbished stores, revamped food ranges and price initiatives.
The moves are aimed at reversing years of underinvestment and halting a loss of share to rivals like J Sainsbury and Asda.