* U.S. writedown 1 bln stg
* 804 mln stg writedown for UK, 495 mln stg for eastern
* Year profit slumps 51.5 pct to 1.96 bln stg
* UK sales growth slows in Q4
* Shares down 2.5 pct
By James Davey and Kate Holton
LONDON, April 17 Britain's biggest retailer,
Tesco, wrote down the value of its global operations by
$3.5 billion and announced plans to exit the United States, as
it sought to rebuild after a year in which profit fell for the
first time in two decades.
The group, the world's third largest retailer after Wal-Mart
and Carrefour, said on Wednesday abandoning
loss-making Fresh & Easy in the U.S. would mean restructuring
and other one-off costs of 1 billion pounds ($1.5 billion).
Tesco also wrote down the value of its property in Britain
by 804 million pounds, reflecting a decision not to develop more
than 100 sites, and its businesses in Poland, the Czech Republic
and Turkey by 495 million pounds, to account for a sharp
slowdown in demand.
Though Chief Executive Philip Clarke hailed Tesco's fourth
quarter performance in its home market as its best quarterly
outcome in three years, it still represented a slowdown in
growth since Christmas, despite a year of huge investment.
"I've been working for Tesco for nearly 40 years and I can
tell you this - it already looks, feels and acts like a
different and a better business," Clarke told reporters.
"We've closed the gap in the (UK) market, at times we've
outperformed it," he said.
Shares in Tesco, up 24 percent over the last three months,
were down 3 percent at 1004 GMT, valuing the business at 30
"Management cannot claim concrete evidence of a UK recovery
with these numbers," said Panmure Gordon analyst Philip Dorgan.
"It will take time - retail is detail - but we believe that
Tesco is on track and we expect recovery in the UK to slowly
emerge in FY2014," he said, adding that Tesco could commence
share buybacks in 2015.
Tesco made a statutory pretax profit of 1.96 billion pounds
in the year to Feb. 13, down 51.5 percent. It also reported an
expected 14.5 percent fall in underlying full-year profit to
3.55 billion pounds, largely reflecting the cost of a 1 billion
pounds turnaround plan for its home market, launched after a
shock profit warning in January last year.
Earnings were also hit by the impact of the euro zone debt
crisis on eastern European markets, restrictions on store
opening times in South Korea, and the Fresh & Easy losses.
Fourth quarter sales at British stores open over a year,
excluding fuel and VAT sales tax, grew 0.5 percent. Though at
the top end of analysts' forecasts it was worse than growth of
1.8 percent recorded in the six weeks to Jan. 5.
Tesco's fightback plan for Britain, where it makes over 60
percent of revenue and profit, has focused on more staff,
refurbished stores, revamped food ranges and price initiatives -
all aimed at reversing years of underinvestment and halting a
loss of share to rivals like J Sainsbury and Asda.
The group also said it had increased a provision to cover
the possible miss-selling of insurance products at its Tesco
Bank to 115 million pounds.
Following the U.S. retrenchment and reassessment of its UK
property plans, including a scaling back of sale-and-leasebacks,
Tesco now expects to deliver mid single digit trading profit
growth, a return on capital employed within a range of 12 to 15
percent and dividend growth broadly in line with underlying
Fresh & Easy, which trades from 199 stores and employs
around 5,000, has absorbed over 1 billion pounds of capital
since its 2007 launch when Tesco was run by Clarke's predecessor
Terry Leahy but has never turned a profit in a market where it
competes with the likes of Trader Joe's and Wal-Mart.
"When I became CEO I really did give it all that we had but
in the end I'm responsible to investors and I know I can deliver
more to them by leaving that I can by staying," said Clarke.
He had put the venture, which contributes just 1 percent of
group turnover, under review in December, saying an exit was
Chief Financial Officer Laurie McIlwee said Tesco had
received "a lot of interest" in Fresh & Easy, both for the
whole business and parcels of stores.
"What we're most interested in is those buyers that are
interested in buying the complete business," he said, noting
that a clean sale would remove redundancy and onerous leasehold
He said Tesco would not conclude the process for at least
another three months.
The group is paying a maintained dividend of 14.76 pence.