Tesco to hire 8,000 staff and revamp it stores following fall in UK profits
SUPERMARKET giant Tesco unveiled a �1billion revival plan today after admitting it needs to raise its game in the wake of a drop in UK profits.
Overall group profits were 1.6% higher at �3.9billion but at a trading level the company said the UK dropped 1% to �2.5bn for the year to February 25 as sales came under pressure from resurgent rivals.
Chief executive Philip Clarke said the group would spend �1bn over the coming year on improving the shopping experience for customers, including a revamp of stores, the recruitment of more staff and better prices and value.
He said: “We fully recognise that we need to raise our game in the UK. As we improve the shopping trip for our customers, it will follow that our sales growth and financial performance will improve too.”
Like-for-like sales in the UK excluding petrol and VAT fell 1.6% in the final quarter of its financial year, including a 2.3% slide over Christmas.
Underlying sales of clothes, electrical items and other general merchandise were down 3.9% over the year in the UK and the group said improving this section of its business was a priority.
But Tesco said it was happy that it will meet City profit expectations for the current year, allaying fears of another profits warning after it shocked markets in January.
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Mr Clarke said many of the changes Tesco needed to make were in progress but the pace of change will accelerate over the current year.
His turnaround plan involves recruiting more than 8,000 staff to improve levels of customer service, particularly in its fresh food departments and its larger stores. It will spend �200million on extra staff and on the training and tools they need to improve levels of service.
The group has already trialled the higher staff levels in 200 stores and has been encouraged after they delivered a 1.1% sales boost.
Mr Clarke, who started his career stacking shelves in Tesco, said the retailer has also stepped up the pace of revamping its existing stores to give them warmer colours, better lighting and more attractive signage.
However, there will be a 38% reduction in the amount of new store space Tesco opens this year, as it reins back big store openings and focuses its efforts on expanding its Express convenience stores and more picking centres to improve its online delivery service.
Tesco admitted that its �500m Big Price Drop launched last year had failed to impress customers. It plans to revamp the initiative to focus more on giving customers special offers and money-off coupons after recent programmes proved a hit.
Other improvements will include a “complete relaunch” of the Tesco brand ranges, a process that has already begun with its Value range being renamed Everyday Value, with its austere blue stripes being replaced by softer colours. Some 2,000 new lines will be introduced this year.
Tesco plans to spend �150m this year revamping its website and has already started allowing other companies to sell their products through it in a bid to compete with Amazon.
It will add a further 700 click-and-collect pick-up points to its stores over the next year, almost doubling the number available as part of plans to grow its online business.
Independent retail analyst Nick Bubb said there were few surprises in Mr Clarke’s plans but added that the sales figures for the final quarter were not “quite as bad as worst fears”.
The group’s overall profits were underpinned by a buoyant performance in Asia where profits were up 22% to �737m, although it warned that high inflation and the slower economy in China may impact future growth.
Its Fresh & Easy business in the US racked up further losses of �153m, an improvement of 17% on a year earlier, but Tesco warned it will take longer than expected for the venture to break even.
Tesco Bank saw trading profits fall 36% to �168m but it said migration to new systems would complete next month, paving the way for faster growth and the launch of mortgages.