Tesco in £1bn fightback to turn around its UK stores

Tesco yesterday put a radical overhaul of its UK stores and dominating online shopping at the heart of a £1bn fightback to turn around its weak domestic performance.

Following the grocery giant's first fall in UK profits for decades, Tesco is also slashing the number of big stores it opens this year, to focus on smaller shops in this country.

The retailer, which has operations in 14 countries, has had a rough ride recently, after its first profit warning in 20 years in January and with its UK underlying sales falling behind those at Morrisons, Asda and Sainsbury's.

Philip Clarke, its chief executive since March 2011, yesterday vowed to invest more than £1bn in its UK operation this year to put the "heart and soul" back into Tesco.

He said: "Tesco has launched a plan to get better in the UK."

His blueprint includes hiring 8,000 more staff – largely into the fresh-food areas of its 750 biggest stores, increasing training, refurbishing a further 430 shops with a "warmer look and feel", and expanding its online operation.

The grocer is investing £150m in its online business, including more than doubling the number of products it sells to 200,000 by Christmas.

In addition to extending its click-and collect service for non-food, Tesco's customers can now pick up groceries ordered online at car park collection points outside 45 of its stores.

But Tesco is slashing the new space it opens in the UK by 38 per cent to 1.5 million square feet this year. This will see the group's capital expenditure cut from £3.8bn to £3.3bn this year.

While Tesco will open fewer superstores and out-of-town hypermarkets this year, it will still introduce more new UK shops in 2012-13, as it focuses on its smaller Metro and Express outlets.

Mr Clarke said: "Large stores with lots of non-food space will probably not be as necessary in 10 years' time because of the growth of the internet."

Tesco posted a 1 per cent fall in UK trading profit to £2.5bn over the year to 25 February, following a 0.9 per cent drop in underlying domestic sales.