Grim times for Tesco

The poor results were driven by weakness across the entire business. In Europe, trading profit plummeted 33 per cent to £238m, forcing Tesco to take a £734m impairment charge on the value of its stores and land. This year will see less investment on the continent, with store space trimmed and expansion virtually halted. Overseas capital will instead be directed towards high returning investments in Korea, Thailand and Malaysia. Across the Asian operations, however, trading profit fell 7 per cent to £692m, and underlying sales dipped 4.5 per cent.

But the biggest weakness is in the core UK business, where Mr Clarke said the supermarket industry is undergoing an "unprecedented level of change". Specifically, already strong competition intensified over the year as discounters Aldi and Lidl gained market share, forcing the big four players into a price war. This drove a 1.4 per cent decline in UK like-for-like sales and a 3.6 per cent fall in trading profit to £2.19bn.

In response, Tesco is spending £200m cutting prices across core foods, like bread, milk and eggs, by as much as a quarter, in the hope of winning back shoppers. Mr Clarke said the investment was “just the beginning” but wouldn't reveal how much more Tesco planned to spend on slashing prices. Given that refurbished stores are generating a 3-5 per cent sales uplift, refurbishments will accelerate and more than double to 650 stores this year. Meanwhile, five superstores will shrink by 20 per cent, with space given over to third party tenants. Finally, Tesco has launched a ClubCard fuel save programme and will introduce a current account. “We will leave no stone unturned, "added Mr Clarke. "You will see big and important changes in next few months."

Shore Capital expects underlying pre-tax profit to fall to £2.7bn in 2015, giving EPS of 26.4p (32.05p: 2014).