Tesco revamps its revamp

Tesco has announced an overhaul of its turnaround strategy for its UK business, which accounts for two-thirds of profits. It is cutting back on expansion and will focus instead on accelerating its store refurbishment programme.

At the same time, it is set to spend £200m on cutting the price of basic goods and will beef up its online offering by introducing more click-and-collect locations. Tesco is abandoning its industry-leading 5.25% profit margin.

What the commentators said

Tesco’s presentation “was a masterclass from [CEO] Philip Clarke and his executive team in changing the strategy without admitting that the initial strategy had failed”, said The Daily Telegraph. Two years after the supermarket giant unveiled a £1bn revamp, it continues to lose market share and Christmas trading was dire.

Tesco’s rivals “will not be quaking in the aisles”, said Nils Pratley in The Guardian. A £200m investment in lower prices isn’t much: two years ago Tesco threw £500m at a “big price drop” and “hardly anybody noticed”. It doesn’t help matters that half of Tesco’s floor space is in the large stores, which are in decline compared to online shopping and convenience stores.

Clarke seems to be betting that his “behind-the-scenes work will eventually improve” sales and restore Tesco’s reputation. This “wishy-washy” approach is likely to take a few years. The new pricing slogan is ‘Down, and Staying Down’, said Ian King in The Times. Let’s hope that doesn’t prove to be a description of the share price.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

MoneyWeek magazine

Latest issue:

Magazine cover
Powering ahead

The best alternative energy stocks

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


28 April 1789: Fletcher Christian leads the mutiny on the Bounty 

Shortly after leaving the beautiful island of Tahiti for home, Fletcher Christian led a mutiny against Lieutenant William Bligh on board HMS Bounty, on this day in 1789.

The Kids' Portfolio: the four best funds to buy for your children

Investing for your children's long-term future is an excellent idea. But what should you buy? The Kids' Portfolio is a simple collection of four funds intended to be tucked away for 20 to 40 years.