Financial News

  • 26 February 2014, 10:17

Supermarket Wars: Tesco Bolsters UK Fightback

Tesco has announced plans to restore customer trust in prices and accelerate its UK turnaround amid the deepening industry battle for shoppers both in-store and online.

In a statement published ahead of an investor and analyst seminar, the country's biggest supermarket chain said its proposals would build on the work already carried out over almost two years to improve its fortunes amid increased competition.

Top of the pile was a £200m investment in additional price cuts and a pledge to end consumer confusion on pricing following a number of critical reports on supermarket industry tactics.

Chief executive Philip Clarke told the meeting: "Prices must get better. They must be more stable. The frivolous promotions must end. Trusted ones should be in place and that's got to start now."

Tesco also planned to open 150 new convenience stores annually.

Mr Clarke has invested over £1bn in store revamps, more staff, new product ranges and pricing initiatives since admitting 22 months ago that the chain had taken the eye off the ball in its core market.

The key Christmas 2013 trading period saw its UK store sales decline 2.4% as discounters enjoyed a greater slice of the business.

The performance prompted Tesco to confirm on Wednesday that it would step up the pace of its large store revamp programme but cut back further on growing new selling space.

The chain would instead focus on faster online and convenience channel growth, meaning group capital expenditure would be reduced to no more than £2.5bn per year for at least the next three financial years.

In the 2012-13 year Tesco's group capital expenditure was £3bn.

Tesco said its seminar would describe to investors how 'Winning in the new era of retail' would be about "putting the customer first" and deliver "the most compelling offers across all channels" with a focus on increasing loyalty and restoring trust on prices.

The company's efforts to transform its major stores into family-friendly retail destinations, with restaurant and leisure facilities, demonstrate the extent of the pressure on it following its failed foray into the US market.

Its Fresh & Easy brand - now sold off - allowed Tesco to concentrate on the challenges posed by Sainsbury's, Asda and Morrisons.

But the 'Big Four' have seen their own market shares eaten away by the biggest discounters, such as Aldi and Lidl.

The statement did not make clear if Tesco was planning to cut its 5.2% profit margin - as was widely reported ahead of the meeting.

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