Tesco boss Philip Clarke to reveal new strategy

 

Tesco boss Philip Clarke will tomorrow unveil his blueprint for
fixing the supermarket after a year of declining sales and market share
erosion.

The UK's biggest private-sector employer, which rocked the City with its first profits warning in 20 years in January, is expected to reveal further pressure over the three months to the end of February, with underlying sales down 2%.

While its profits for the last year will still hit £3.9 billion, the rise of 1.7% is slower than the 12% seen a year earlier and will reinforce pressure on Mr Clarke to unveil a strategy to restart the Tesco juggernaut.

He is likely to admit that its stores are tired and lack warmth and that more staff, friendlier service and a back-to-basics approach are needed.

A recent trial of 200 new look stores has offered encouragement and will prompt Tesco to commit £400 million to revamping its 2,800 UK stores.

Mr Clarke took over from Sir Terry Leahy a year ago, having previously been international and IT director. But the Liverpudlian started his career stacking shelves in a Tesco store and claims he understands retail and knows how to make stores appeal to shoppers.

He has already said he plans to cram a three-year overhaul into the next 12 months, including a raft of initiatives dealing with online, price and home delivery, and more detail will be provided tomorrow.

Tesco's website will be overhauled to better compete with internet rivals such as Amazon and a new pricing strategy will see it combine constant low pricing on staple items with eye catching promotions.

There will also be more focus on the quality of its food, particularly fresh items, and Mr Clarke is expected to confirm that the chain's expansion in the UK will slow as it opens fewer large out of town stores, which have been hit by the rise in petrol prices and falling demand for electrical items.

Instead it will ramp up its focus on its smaller Express formats, analysts predict.

And Mr Clarke is set to ignore radical calls from disillusioned investors to scrap the loss making US-based Fresh & Easy venture and its banking division.

Several year of success under previous chief executive Sir Terry drove Tesco's market share beyond 30% but the resurgence of rivals including Sainsbury's and Morrisons and the recent failure of Tesco's £500 million Big Price Drop has seen the chain fall back below that milestone.

Although the UK business is feeling the pain, the group's overall profits are set to be underpinned by a strong performance in Asia despite the floods in Thailand.

Jonathan Pritchard, an analyst at Oriel Securities, said turning around Tesco "is not mission impossible" but warned it must undergo root and branch surgery and it could be a year before like-for-like sales return to growth.

He said: "Many are keen to see the Tesco bandwagon roll again but our view is that the problems the company faces are very deep set.

"Tesco must show a willingness to take its medicine in the UK and play a longer term game in rebuilding its domestic position."

The group has already said it will hire 20,000 more full and part-time staff over the next two years as it focuses on improving its customer service.

It has recently overhauled its £1 billion Value range as Everyday Value by upping the quality and ditching the austere blue stripes for softer hues and its Finest range could be next in line.

Overall, it has been estimated that the investment in the business over the next few years will cost Tesco more than £1 billion, although it is expected to make cost savings to help keep future profits on track.

While the City expects that turning Tesco around will not happen overnight, they will be looking for any indication about future profits.

PA

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