Tesco tears up plans for new superstores

Grocer to detail revival strategy as UK profits dip

Tesco has put all new plans for superstores on hold for the next three years as the retail empire takes drastic action to turn around its fortunes.

Philip Clarke, its chief executive, will slash spending after he unveils the first decline in annual profits in its UK business for at least 20 years on Wednesday. As part of his strategy to tackle Sainsbury's resurgence, Tesco's development team will not commit to any new large supermarkets for the next three years.

The move will see the grocery giant only signing up for small stores such as convenience stores and Metro concepts. Its superstores – of more than 25,000 sq ft – and its huge Tesco Extra formats are on ice, which will cheer environmentalists who claim a "Tescopoly" has ruined the landscape and strangled market towns. But its lengthy development pipeline will still mean Tesco will continue to open large stores for the next two years.

Mr Clarke could also signal that he plans to exit some of the group's peripheral businesses, such as its gold-for-cash exchange business and its non-food Homeplus stores, as he seeks to focus on improving the performance of the UK operation, which accounts for two-thirds of the group's profits.

Tesco is set to post a 2 per cent fall in UK trading profits to £2.47bn over the year to 25 February, according to its joint house broker Nomura. This partly reflects the UK operation's dire 2.3 per cent fall in underlying UK sales over the six weeks to 7 January.

On Wednesday, Mr Clarke, who has suffered a management exodus since he took over the helm from Sir Terry Leahy in March 2011, will flesh out the details of nearly £800m of expenditure on refurbishing the UK stores over the next two years, according to the broker JP Morgan Cazenove.

This strong UK focus has led some analysts to speculate that Tesco could exit from other "more tangential" businesses, following the closure of its second-hand cars website this year. James Anstead, an analyst at Barclays Capital, said: "There may be some symbolic value in being seen to close some of the more unusual departures." He also expects Tesco to confirm the "running down" of Homeplus.

Despite its UK wobble, Tesco will still grow its group pre-tax profits by 2 per cent to £3.88bn over the year, boosted by strong growth overseas, where it operates in 13 countries.

Tesco has set its US business a target of "break even" by February 2013.

Start your day with The Independent, sign up for daily news emails
election 2015The 10 best quotes of the campaign
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'