Tesco has reported a 6% drop in annual group trading profit as boss Philip Clarke warned that the trading environment is changing rapidly. Retail-week.com summarises the analyst reaction.

“Tesco has reported financial figures for the year to February 2014 that makes for very disappointing reading for its shareholders. The business, once a shoppers’ champion and source of commendation for the United Kingdom’s business community is, under the stewardship of chairman Sir Richard Broadbent, in a cycle of what seems to be structural decline involving a sustained period of downgrades to earnings. To stem the tide of downgrades Tesco has a board that currently comprises one executive, CEO Philip Clarke. Whilst we are not investors, as opposed to commentators to the company, we cannot hide our disbelief that there has been no succession planning for the replacement of Mr. Clarke’s CFO, Laurie McIlwee, whose resignation was announced on the 4th April. Accordingly, with an executive board of one person, we assert that shareholders can only look to the non-executive directors as the source of responsibility for the group’s current plight to our minds. Hence, we repeat our belief that a newly constructed board is necessary to take Tesco forward with a more conventional balance between executive and NEDs; the present structure and performance does not reflect well upon Tesco’s chairman in our view.” - Clive Black, Shore Capital

“While the decline in profitability and like-for-like UK sales comes as no surprise, it marks the end of a disappointing year for Tesco. Philip Clarke is coming in for a lot of harsh criticism from assorted commentators and ex-colleagues, but we hope that this is the end of the beginning rather than the beginning of the end for his tenure. He has made some tough but necessary decisions on international in particular, but there is still much to be done, in Ireland and Central & Eastern Europe in particular. In the UK, the two missing ingredients are clarity and consistency. The proposition, particularly in pricing, is muddled and confused. Tesco doesn’t necessarily need to have the lowest prices to recover – instead its pricing needs more clarity, predictability and transparency.” - Bryan Roberts, Kantar Retail

“Tesco has failed to adapt to the change in competition from space race to distinct-offer competition. By raising prices faster than anybody else, Tesco has lost its differentiation, giving a free ride to the targeted retailers at both ends of the spectrum (value and quality). Current strategy for the UK is pushing the company in the wrong direction (upmarket), and internationally it remains overly centralised. Concerns  about the quality of the earnings and accounting principles pose a risk of further write-downs or profit resets.” – Bruno Monteyne, Bernstein Research

“Tesco must do more to return to the days when it genuinely led the industry but there seems little here that’s new from a strategic perspective. The tactics outlined at the investor day are not far reaching enough in our view. It is hard to see the top and bottom line momentum in the UK turning in the short term.Overseas, life remains difficult too even if Asia and Europe with profits down 7% and 28% respectively. In Europe there are £734m of asset writedowns reflecting management’s revision of long-term budgets. Asia is continuing to suffer from a poor environment in Thailand and opening hours restrictions in Korea, although the latter is easing slightly. Sentiment here depends disproportionately on the UK and today will do little to allay strategic fears, particularly in the context of a further slowdown in the UK. However, much of Tesco’s malaise is priced in now, and the inline numbers today may stem the downward trend in the shareprice. They remain only for the brave though.” - Jonathan Pritchard, Oriel Securities

“While these results are at the better end of market forecasts, this is a second consecutive decline in annual profits for Tesco, which, taken together with its continued fall in food and grocery market share, makes for grim reading. It faces significant challenges from a weak consumer climate and intensifying competitive pressures as from the discounters at one end of the market and the likes of Waitrose at the other. Moreover, while it has seen some uplifts from its store investment programme, the pace of its progress over the last 12 months is inevitably drawing further scrutiny on its current strategic direction.” - George Scott, Conlumino

“The long road ahead appears to have been shortened a little, and whilst the UK outlook remains challenged, we are more positive than most that UK grocers have a huge reserve of investment at a disposal when considering the remarkable levels of promotional activity on which the industry operates. The group could provide long suffering shareholders with a more considerable buffer by extracting cash out of international operations in order to step up the process of organic deleverage.” - James Grzinic, Jefferies