Tesco reports, now the hard work begins.

Tesco reported this morning and while there was nothing overly dramatic in the results there was enough perhaps to raise some eyebrows going forward and see the shares sell off a little.

Bottom line is that profits are down 52% which is huge, especially for a company the size of Tesco. A year ago they were at £4 billion in pre tax profits, now it is under £2 billion. However, much of this seems to be due to one off costs.

The decision to finally pull out of the US has been confirmed at a cost of around £1.2 billion. The market knew that this write off would have to happen from pulling out.

Another £800 million has come from property write downs that they are no longer going to develop. Again, this should have been priced into market thinking as Tesco had stated that they were going to concentrate and invest in current stores in the UK.

However, the £1 billion investment in the UK side does not seem to have had a dramatic effect thus far on the bottom line. Trading profits in the UK fell 8.3% in the 52 weeks to February.

There are also difficult economic headwinds to contend with overseas in Europe and Korea.

One big plus today is the continued growth online, up 13% with £3 billion of sales which at the very least will be a reminder to Morrisons that they need to get a move on to get online as they fall further behind.

Another plus is that in these low savings rates times, Tesco has maintained its dividend at around 4%.

For Tesco the hard work now really begins as one would expect these one off write downs to have little further effect going forward. Once out of the US, Tesco needs to get it right in the UK and then hope that any down turn in Europe isn't too severe. Then there's Korea, small overall, but still a dent on profits, with the prospect of war with the North always it seems just over the horizon.

The market will now be concentrating on the pay off from that £1 billion investment in the UK. Going forward Tesco needs to show that it has got this right. If it has then Tesco remains a decent recovery play going forward, but there is still enough doubt, especially as the UK is a very mature market where it might be difficult for the company to get back the market share it has lost. It should be remembered that Tesco had 30% of this market a few years ago and is still the market leader by some way. Getting back to 30% in itself will be a difficult job and remains the reason why ultimately Tesco has to develop elsewhere which despite the US failure includes overseas.