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Tesco half year profits down 23.5%

03 October 2013

Tesco has reported a 23.5% fall in profits for the first half of its financial year with pre-tax profits of 1.39 billion pounds.

The UK’s largest supermarket chain cited a challenging retail environment, particularly in Europe.

While Tesco’s UK like-for-like sales (excluding new store openings) fell by 0.5%, rival Sainsbury's reported a 2% rise during the second quarter of its financial year.

Tesco’s profits fell 67% in Europe to £55million, while Asian profits, excluding China, dropped 7.4% to £314m. UK trading profits rose 1.5% to £1.13bn. Group profit margins fell from 5.4% to 4.9%.

In 2012, Tesco announced it would be spending £1bn on improving its stores in the UK, investing in shop upgrades, product ranges, more staff, as well as its online offering. However, the chain recently sold 150 of its US Fresh & Easy stores to investment company Yucaipa Companies.

Tesco's chief executive, Philip Clarke, told the BBC's Today Programme: "There is less pessimism around, but customers are still not seeing real disposable incomes improve. They are, perhaps, feeling a little better about the future."

Tesco's results came as the firm announced a joint venture with China Resource Enterprises (CRE). The UK firm will combine its Tesco China business, which includes 134 Chinese stores, with the 2986 stores held by CRE's Vanguard business.

Tesco will have a 20% stake in the business, which it said would have sales approaching £10bn.

Sainsbury's chief executive Justin King said his firm was the only major supermarket increasing its market share. "Our groceries online business grew by over 15% in the quarter and is now worth over £1bn in annual sales." he said.

"Our convenience business grew 20% year-on-year as customers topped up more frequently during the warm summer weather."

Sainsbury's said sales of its own-brand products had continued to rise at more than twice the rate of branded goods, with its premium Taste the Difference range growing particularly strongly.

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