Tesco Swings to Loss on Korea Costs -- Update

By Saabira Chaudhuri and Rory Gallivan 

LONDON-- Tesco PLC swung to a loss for the half-year as Britain's largest retailer reported lower revenue and losses from discontinued operations, such as the Korean business it recently agreed to sell.

Its net loss for the 26 weeks ended Aug. 29 was GBP365 million ($556.39 million), compared with GBP6 million profit a year earlier, which included earnings from Korea.

Revenue, excluding value added taxes and fuel, fell to GBP23.9 billion from GBP24.3 billion.

Tesco's results included charges of GBP563 million, including a $177 million restructuring charge and a GBP187 million reversal of commercial income recognized in previous years. Tesco said its operating profit--which strips out large one-time charges--was GBP354 million compared with GBP779 million.

The company isn't paying an interim dividend and said its full-year expectations are unchanged.

The results come a year after Tesco chairman Richard Broadbent said he would step down in light of an accounting issue tied to commercial income that led to profit being overstated by GBP263 million.

Under Chief Executive Dave Lewis, Tesco has been working to regain some of the traction it had before a period of slumping sales hammered profit, while the company's reputation was tarnished by the scandal.

"Our transformation program in Europe has accelerated growth and reduced operating expenses, and in Asia, we have gained market share in challenging economic conditions," Mr. Lewis said.

Tesco has cut prices on a raft of items, aimed to simplify relationships with suppliers, put more staff on the shop floor and closed unprofitable stores. The company reported its U.K. like-for-like sales had fallen 1.1% in the first half, while international like-for-like sales climbed 1%.

Last month it agreed to sell its South Korea business, Homeplus, for $6.1 billion in cash, and Chairman John Allan recently indicated that Tesco wasn't interested in making further overseas disposals.

Tesco earlier this year hired Goldman Sachs to explore options for its data analytics Dunnhumby unit. But the company was unable to find a buyer who would pay the price it wanted and on Wednesday said it was keeping the business.

Write to Saabira Chaudhuri at [e-mail] and Rory Gallivan at [e-mail]

Corrections & Amplifications

Tesco said its operating profit--which strips out large one-time charges--was GBP354 million compared with GBP779 million. An earlier version of this article misstated the year-earlier figure.

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October 07, 2015 04:50 ET (08:50 GMT)

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