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Tesco to unveil revamp plan after first profit fall in 20 years Tesco to unveil revamp plan after first profit fall in 20 years
(34 minutes later)
Tesco boss Philip Clarke will lay out plans to revive the supermarket's largest stores on Wednesday when he reveals the first fall in profits for 20 years. Tesco's boss, Philip Clarke, will lay out plans to revive the supermarket's largest stores on Wednesday when he reveals the first fall in profits for 20 years.
The retailer is expected to report that underlying sales growth has slowed since Christmas despite investing £1bn to boost Tesco's fortunes in the UK since a shock profits warning a year ago.The retailer is expected to report that underlying sales growth has slowed since Christmas despite investing £1bn to boost Tesco's fortunes in the UK since a shock profits warning a year ago.
Cutting prices and hiring more store staff has so far failed to offset the impact of the horsemeat scandal, as has tough competition from discount stores such as Aldi and on-going difficulties with Tesco's non-food ranges. Cutting prices and hiring more store staff has so far failed to offset the impact of the horsemeat scandal, together with tough competition from discount stores such as Aldi and ongoing difficulties with Tesco's non-food ranges.
"Either it is solving the wrong problem or trying to solve it in the wrong way," said Dave McCarthy, a food retail analyst at Investec. "In reality, Tesco's problems are multi-dimensional." "Either it is solving the wrong problem or trying to solve it in the wrong way," said Dave McCarthy, a food retail analyst at Investec. "In reality, Tesco's problems are multidimensional."
While Tesco tries to improve service and reassure shoppers after finding horsemeat in some of its products, Tesco is also experiencing difficult trading conditions overseas. While Tesco tries to improve service and reassure shoppers after finding horsemeat in some of its products, it is also experiencing difficult trading conditions overseas.
The retailer is expected to reveal a £1bn hit to profits from exiting the US after putting the future of its California-based Fresh & Easy chain under review last year. Rivals including Aldi are thought to have shown an interest in taking on stores but no deal is expected to be announced this week.The retailer is expected to reveal a £1bn hit to profits from exiting the US after putting the future of its California-based Fresh & Easy chain under review last year. Rivals including Aldi are thought to have shown an interest in taking on stores but no deal is expected to be announced this week.
Even before the US hit, profits are expected to have fallen by 10% to £3.4bn in the year to February. Revenues are thought to have risen 1.6% to £66.2bn.Even before the US hit, profits are expected to have fallen by 10% to £3.4bn in the year to February. Revenues are thought to have risen 1.6% to £66.2bn.
Tesco has recently announced a buy-out of the family restaurant chain Giraffe and also holds stakes in Harris + Hoole coffee shops plus the Euphorium bakery. Clarke is expected to outline how these businesses will help add pizzazz to stores covering more than 60,000 sq ft (6,300 sq m). Tesco has recently announced a buy-out of the family restaurant chain Giraffe and also holds stakes in Harris + Hoole coffee shops and Euphorium bakeries. Clarke is expected to outline how these businesses will help add pizzazz to stores covering more than 6,300 sq metres (60,000 sq ft).
A year ago Clarke said Tesco would put the brakes on opening such large stores in the UK as shoppers choose to buy closer to home rather than pay for the petrol to drive to hypermarkets. A year ago Clarke said Tesco would put the brakes on opening such large stores in the UK as shoppers increasingly choose to buy closer to home rather than pay for the petrol to drive to hypermarkets.
On Wednesday, Clarke is expected to announce similar plans in eastern Europe and other foreign markets where Tesco will put more effort into building online sales and opening small local stores.On Wednesday, Clarke is expected to announce similar plans in eastern Europe and other foreign markets where Tesco will put more effort into building online sales and opening small local stores.
Profits in markets such as Hungary, Poland and the Czech Republic have fallen back amid the Europe-wide economic difficulties.Profits in markets such as Hungary, Poland and the Czech Republic have fallen back amid the Europe-wide economic difficulties.
Tesco's sales are also thought to have taken a battering in South Korea after the government brought in new restrictions on trading hours.Tesco's sales are also thought to have taken a battering in South Korea after the government brought in new restrictions on trading hours.
Meanwhile, the retailer is turning to independent shopkeepers to help drive its expansion by offering franchise deals on its One Stop chain.Meanwhile, the retailer is turning to independent shopkeepers to help drive its expansion by offering franchise deals on its One Stop chain.
One franchise outlet has been operating for a few weeks and the group is aiming to sign up a handful of new partners to test-run the concept over the next six months. One franchise outlet has been operating for a few weeks and the group is aiming to sign up a handful of new partners to test the concept over the next six months.
One Stop's chief executive, Tony Reed, said: "We and our customers want to see neighbourhood convenience shops thrive. Our franchising concept is about helping good independent family businesses make an even greater success of their stores."One Stop's chief executive, Tony Reed, said: "We and our customers want to see neighbourhood convenience shops thrive. Our franchising concept is about helping good independent family businesses make an even greater success of their stores."
Many independent convenience stores operate under so-called symbol groups such as Londis, Spar and Budgens, giving them better deals on stock as well as help and advice on marketing.Many independent convenience stores operate under so-called symbol groups such as Londis, Spar and Budgens, giving them better deals on stock as well as help and advice on marketing.
Tesco's concept would effectively work in the same way, with independent retailers paying to use the One Stop name, sourcing stock from the parent company and sticking to certain rules on how their stores are laid out. Tesco's concept would in effect work in the same way, with independent retailers paying to use the One Stop name, sourcing stock from the parent company and sticking to certain rules on their stores' layout.
One Stop, which operates 640 of its own stores, said: "We believe this is a real opportunity and feel there's a gap in the market because we can offer something different to independent retailers." A spokeswoman for One Stop, which operates 640 of its own stores, said: "We believe this is a real opportunity and feel there's a gap in the market because we can offer something different to independent retailers."
One industry insider said independent retailers would have to decide whether they should continue to compete with Tesco or would be safer in the arms of one of their biggest rivals. "Some groups might get agitated but the world has now changed and everybody is trying new ideas," he said.One industry insider said independent retailers would have to decide whether they should continue to compete with Tesco or would be safer in the arms of one of their biggest rivals. "Some groups might get agitated but the world has now changed and everybody is trying new ideas," he said.
Tesco is the largest convenience store operator in the country, running about 1,500 Tesco Express stores as well as the One Stop chain.Tesco is the largest convenience store operator in the country, running about 1,500 Tesco Express stores as well as the One Stop chain.