QuickPost News | London
LONDON—Tesco’s CEO Ken Murphy declared the “space race” officially dead on Tuesday, unveiling a radical pivot as Britain’s retail titan reported a 22% profit crash—the steepest in over a decade. Pre-tax profits for the fiscal year ending February 28, 2025, slumped to £1.95 billion from £2.5 billion in 2024, hammered by a £300 million write-down on 50 mothballed superstores and a fierce price war with discounters Aldi and Lidl. Shares slid 6% to 305p, erasing gains from a 2024 rally, as Murphy doubled down on a leaner future: “The days of chasing square footage are over—we’re building a Tesco for 2030.”
The “space race”—a decades-long frenzy to blanket Britain with sprawling supermarkets—once defined Tesco’s dominance, peaking at 45.9 million square feet by 2013. But with online sales now 18% of its £68 billion global revenue (up from 15% in 2023), and convenience stores outpacing superstores 3-to-1 in footfall, Murphy’s axing 200,000 square feet of planned expansion this year. “Customers want quick, affordable, and digital,” he said, pointing to a £150 million boost for Tesco’s Clubcard app and 100 new urban Express stores. The shift echoes Clarke’s 2013 retreat, when profits fell 51% amid a £1.2 billion U.S. exit—only now, it’s Aldi’s 12% UK market share (Kantar, Feb 2025) driving the knife.
Finance isn’t pretty: underlying UK profits dropped 14% to £1.8 billion, hit by £80 million in energy costs and a 5% wage hike to £11.95/hour after union pressure. Food sales edged up 2.1% to £45 billion, but non-food—think TVs and furniture—tanked 8%, prompting a £50 million inventory purge. Globally, Tesco’s Polish and Thai arms bled £90 million, stung by a 7% Eurozone slowdown and Thai floods. Yet, Murphy touted a silver lining: online grocery profits hit £300 million, up 25%, and a £20 million deal with Amazon to bundle Prime with Clubcard perks.
Politically, the timing’s fraught. Labour’s £2 billion retail tax hike—slated for April—looms over margins, while a 6.7% minimum wage jump adds £120 million in costs. “Government’s squeezing us as hard as the discounters,” Murphy quipped, nodding to a £40 million lobbying push with the British Retail Consortium. Retail rivals aren’t faring better—Morrisons posted a £200 million loss last month—but Tesco’s scale still dwarfs them.
Analysts are split. Shore Capital’s Clive Black called it “a necessary reset,” eyeing a £2.2 billion rebound by 2026 if online scales. But Deutsche Bank’s James Collins warned: “They’re late to the party—Aldi’s already won the value war.” Shoppers seem to agree—X buzzed with “Tesco’s too posh for the cost-of-living crowd” memes. With Christmas trading ahead, Murphy’s banking on a £100 million price-slashing blitz to claw back ground. Is this the end of Tesco’s empire, or a phoenix moment? QuickPost News will keep you posted.
