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 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.
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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.
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