Tesco's Clarke backs pressured UK boss

Tesco chief executive Philip Clarke has stood by the head of the grocer's UK business, Richard Brasher, after it issued a profits warning and posted its worst underlying domestic sales for two decades.

Almost 15% was wiped off the market capitalisation of Tesco today after it said operating profits would be at the bottom end of City forecasts this financial year, with "minimal" growth next year.

Shares in rivals Sainsbury's and Morrisons also took a pounding, as investors fretted over growth prospects in the sector and fears that Tesco may ratchet up its price discounting.

Clarke strongly defended Brasher, its UK chief executive since March 2011 who joined Tesco in 1986. He said: "Richard and I see eye to eye completely on this. When I chose him to run the UK, it was for a specific reason. He and I grew
up in this business. We are absolutely resolved, determined and absolutely together."

Tesco's UK operation, which accounts for more than two-thirds of group operating profit, posted a 2.3% fall in like-for-like sales, excluding fuel and VAT, for the six weeks to 7 January.

This was worse than City expectations and down on the 0.7% rise in underlying sales at Morrisons and 1.2% growth at Sainsbury's. Clarke admitted it was Tesco's worst underlying UK performance for "certainly two decades".

The UK market leader, which has operations in 14 countries, saw its shares slump by 55.1p, or 14%, to 329.4p while Morrisons tumbled by 7% and Sainsbury's fell 5%. But, boosted by a rapid store opening programme, Tesco's total UK sales, excluding petrol, rose by 1.7%. The world's third-largest retailer grew group sales by 4%, driven by strong international revenues, particularly in Asia and the US.

The grocer is expected to grow pre-tax profits to £3.6 billion in 2011-12, according to Deutsche Bank.