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| Tesco reports sharp drop in profits | Tesco reports sharp drop in profits |
| (35 minutes later) | |
| The UK's biggest supermarket chain, Tesco, has reported a 23.5% drop in profits during the first half of its financial year. | The UK's biggest supermarket chain, Tesco, has reported a 23.5% drop in profits during the first half of its financial year. |
| Tesco's pre-tax profits in the six months to 24 August were £1.39bn, with UK trading profit up 1.5% to £1.13bn. | |
| UK like-for-like sales - which strip out the impact of new stores - fell by 0.5%. | |
| Rival Sainsbury's reported a 2% rise in like-for-like sales during the second quarter of its financial year. | Rival Sainsbury's reported a 2% rise in like-for-like sales during the second quarter of its financial year. |
| 'Making progress' | 'Making progress' |
| Tesco said it had seen a challenging retail environment in Europe, where profits fell 67% to £55m. | Tesco said it had seen a challenging retail environment in Europe, where profits fell 67% to £55m. |
| It also saw margins being squeezed, in what is already a notoriously competitive retail environment. Group profit margins fell from 5.4% to 4.9% over the period. | |
| The company's shares fell 2.5% in early trading. | |
| The firm's chief executive, Philip Clarke, said Tesco was making progress and was strengthening its UK business, but he saw little improvement in consumers' spending power. | The firm's chief executive, Philip Clarke, said Tesco was making progress and was strengthening its UK business, but he saw little improvement in consumers' spending power. |
| "There is less pessimism around, but customers are still not seeing real disposable incomes improve," he told the BBC's Today Programme. | "There is less pessimism around, but customers are still not seeing real disposable incomes improve," he told the BBC's Today Programme. |
| "They are, perhaps, feeling a little better about the future," he added. | "They are, perhaps, feeling a little better about the future," he added. |
| Neil Saunders, managing director of retail consultants Columino, said that as Tesco continued with an organisational overhaul, results needed to show signs that it was moving in the right direction. | |
| "Against this standard it is fair to say that Tesco is making some progress, especially on the UK front," he said. | |
| "However, they also indicate some more worrying signs that there are a number of deep seated issues on the international scene that need to be addressed." | |
| Tesco's results came as the firm announced a joint venture with China Resource Enterprises (CRE) , | 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 2,986 stores held by CRE's Vanguard business. | The UK firm will combine its Tesco China business, which includes 134 Chinese stores, with the 2,986 stores held by CRE's Vanguard business. |
| Tesco will have a 20% stake in the business, which it said would have sales approaching £10bn. | Tesco will have a 20% stake in the business, which it said would have sales approaching £10bn. |
| Outperforming | |
| 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. |