Tesco saw its share price fall 4% this morning after the UK’s largest retailer revealed a sharp drop in first-half earnings.

Pre-tax profits fell 23.5% to GBP1.39bn (US$2.25bn) in the six months to 24 August. Tesco cited the impact of “significantly reduced” profits from property-related items.

However, trading profit amounted to GBP1.59bn, down 7.6% on last year, reflecting the effects of “challenging” economic and trading conditions in Europe, in addition to the impact of regulatory restrictions on opening hours in South Korea, the retailer said.

Tesco said trading profit from its European operations was down almost 71%, with profits down in each of its markets in central Europe and losses in Turkey increasing “significantly”.

Profits in Asia dropped 12.4%, with Tesco citing the restrictions in South Korea and “disappointing” like-for-like sales in Thailand.

Group sales, including VAT, were up 2% at GBP35.58bn, or 2.6% excluding petrol. UK like-for-like sales excluding VAT and fuel dipped 0.4%. Like-for-like sales in Europe fell 4%. Tesco did not provide a figure for the whole of Asia.

Nevertheless, Tesco pointed an increase in profits from its UK business, once its banking arm was excluded from the numbers. It also cited a 1% increase in UK like-for-like sales.

Shares in Tesco had recovered slightly as the morning progressed but were still down 3.16% at 347.75p at 10:12 BST.

Speaking at a conference with analysts after the results were announced, Tesco expressed confidence profits from its European business could improve. It also said its Asian business was “robust” and “well positioned” for growth.

Click here for the full statement from Tesco