Tesco has reported the worst results in its history – registering a pre-tax loss of £6.4bn in the last year.
The UK supermarket, a big vendor of books, and currently being investigated by the Serious Fraud Office after it overstated its half-year profit forecast last August by £263m, sustained £4.7bn of it losses due to a fall in the property value of its UK stores.
The company has previously said it would close 43 stores, but following today’s results, a retail analyst from Cantor Fitzgerlad told the Guardian that Tesco should consider closing up to 200 underperforming stores, slash staff numbers and drop less profitable products.
In a research note, Mike Dennis said: “Tesco should not only reduce its slowest selling product range, but also reduce credit days to secure a much lower net cost of goods to invest and recapture its customer base and squeeze Sainsbury’s who we believe have been the main net beneficiary of Tesco’s poor trading.”
While Tesco reported pre-tax losses of £6.4bn for the year to the end of February, down from £2.26bn a year earlier, UK like-for-like sales excluding fuel fell by 3.6% in the year. But new c.e.o Dave Lewis said the retailer was beginning to see signs of his changes taking effect and shares rose 1% today following news of the results. “The results we have published today reflect a deterioration in the market and, more significantly, an erosion of our competitiveness over recent years,” Lewis said. "We have faced into this reality, sought to draw a line under the past and begun to rebuild, and already we are beginning to see early encouraging signs from what we've done so far."
He added that he expected conditions in the coming financial year to remain challenging.
Publishers are likely to be troubled by the deepening losses of Tesco and the call for the supermarket to shut even more stores. The retailer, which already closed its e-books platform blinkbox books earlier this year after a deal to sell it to Waterstones fell through, is a big vendor of books for many big commercial publishers. The supermarket is already yet to announce a replacement for its former head of books Paul Duffy who left last November research from Nielsen’s Books & Consumer survey has recently revealed the intense pressure the supermarket channel for books is facing, with their share falling to 8.9% of the overall market between January and August 2014, down from 10.5% a year earlier.
Sainsbury’s is also under pressure, closing stores and axing head office staff, with book buying manager Phil Carroll leaving last month.