Must do better pledge by Tesco as group misses growth targets

The retail giant promised new products and services after revealing a 0.7 per cent drop in fourth-quarter UK like-for-like sales, excluding VAT and fuel.

Its fast-growing Asian business helped offset a tough domestic market, with Tesco reporting another year of record underlying profits – up 12.3 per cent to £3.8bn in the year to February 26.

But new boss Philip Clarke said the UK performance was not good enough as it failed to keep up with rivals in areas such as clothing and electricals.

“We didn’t achieve our planned growth in the year and this was only partly attributable to the deterioration in the consumer environment during the second half,” the group said. “We can do better and we are taking action in key areas – for example, to drive a faster rate of product innovation and to improve the sharpness of our communication to customers.”

The sales results mark a tough debut for Mr Clarke, who took over from Sir Terry Leahy last month. The fourth-quarter sales fall marks the first such dip into negative territory for nearly two years.

Retail analysts were also alarmed by losses in its fledgling US business, with the Fresh & Easy chain slumping into the red by £186m.

Mr Clarke vowed to up Tesco’s game as part of a six-point plan for the year ahead. He said the group would have to tap into a trend for far more cautious consumer spending.

The group also hinted at new and improved food lines and pointed to its move into the second-hand car market through Tesco Cars, as an example of recent product innovation.

Overall group profits rose 11.3 per cent to £3.5bn on a statutory basis, while revenues hit £68bn. Profits from services outside its traditional supermarket business continued to grow, to £583m.