Tesco gets boost as recovery plans become clear

The market appears to buy Tesco's plans for its under-pressure UK business, after the Chief Executive Philip Clarke admitted Britain's biggest retailer has a 'long way to go' while attending a store opening yesterday (Monday).

Tesco's shares dropped 20% at the beginning of January following a profit warning. Since then the company has turned in sales figures consistently down on the prior year, while the boss of UK operations, Richard Brasher resigned in March.

News of the supermarket chain's falliblity shocked investors used to Tesco obliterating all opposition through a strategy of rolling store openings and extremely tight pricing.

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The firm believes the wheels came off partly because it stopped focusing on the UK. Projects in both the US and Asia came to dominate the headlines but more crucially the domestic store offering was seen to have become jaded.

That's changing, with a £1bn investment programme underway, more staff being recruited to enhance customers' in-store experience and data from Tesco's Clubcard being used to calibrate the offering in each store to reflect more closely the demographic of its area.

The platform for Tesco to deliver all these positive messages was a store reopening in Bishops Stortford, Hertfordshire, attended by Chief Executive Philip Clarke and a bevy of journalists. The context though is difficult. The competition has upped its game and Tesco saw its market share drop from 30.9% in April 2011 to 30.7% in April this year.

It may seem like a small drop but after years of expansion, these are worrying times for Tesco. Nevertheless, with a new strategy in place, the stock has risen nearly 10% in the last three months and, following the Bishops Stortford junket, and consequent press coverage, they have pushed up 0.6% on Tuesday

BS