Tesco to invest £1bn in UK business and refresh a quarter of estate in next year

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Tesco has announced a £1bn investment in its UK business in a bid to revive declining sales. 

The UK’s largest supermarket plans to refresh or refit 430 UK stores in 2012/13, equivalent to a quarter of its estate. 

It is also investing in its workforce with increased staff hours and plans to recruit 8,000 new store staff.

Overall, group pre-tax profits rose 5.3% to £3.8bn in the year to 25 February 2012.

But profits at the UK operation fell 1% to £2.5bn compared with the previous year.

Tesco also said that like-for-like UK sales fell by 1.2% in the second half of its financial year.

According to Tesco, the store refresh is designed to improve the look and feel of stores for customers – featuring warmer colours, better lighting, improved sightlines across the store and clearer, less functional signage.

There will also be an increased emphasis on fresh departments, including service counters, as well as for example, beers, wines and spirits areas.

New store staff will also be recruited and focused on the fresh foods departments, Tesco said.

Tesco said it is also reviewing its investment plans for new property to reflect the growing importance of its online business in general merchandise. 

It plans to continue to invest in its Express convenience format and its dotcom-only stores but 38% less new space will be added in 2012/13 versus 2011/12 .

Commenting on Tesco’s property plans, Helen Bunch, managing director at retail contractor Wates Retail, said: “Tesco’s strategy to refresh or refit more than 25% of its total UK floorspace in 2012/2013 reflects the need for major grocery chains to be a lot smarter about how they use space in their stores.

“Changing consumer habits in the downturn have forced all the big supermarkets to invent ways to maximise the value of each and every square foot of existing stores in such a competitive marketplace. ‘Build it and they will come’ no longer applies as industry experts estimate consumer consumption will have to rise by approximately £20bn to maintain sales densities at present levels, if the supermarkets develop all the space they have planned.

“In place of brand new large-format stores, we’re seeing the big brands being more creative in extending or adding mezzanine levels to existing stores to create space for more locally sourced brands, non-food products and other offerings such as banking, health and ‘click and collect’ services, while expanding their convenience offers in locations which are not currently well served.

“The ‘space race’ is far from over, but the rules of the game have changed. Given its remarkable track record, and the fact it remains Britain’s biggest supermarket chain by market share it would be naive to think that Tesco cannot attract customers back into its stores.”

Chief executive Philip Clarke acknowledged Tesco needed to raise its game in the UK. 

We are committing over £1bn to make the UK shopping trip better for customers: more staff giving improved service in-store; refreshed stores that are better and easier places to shop; lower prices and even more value from an improved product range,” he said.

“As we improve the shopping trip for our customers, it will follow our sales growth and financial performance will improve too.”