Considering he was announcing Tesco’s first fall in UK profits for two decades, chief executive Philip Clarke appeared remarkably relaxed as he faced the world’s press in London.
Jocular, informal and dispensing with the usual glossy presentation in favour of an extended Q&A over sandwiches (not the Everyday Value variety), if the 1% fall year on year in Tesco’s heartland had got to him, he wasn’t showing it.
But how far did Clarke’s £1bn turnaround plan go towards answering the big questions?
Q: What is he doing about UK stores?
Of the £1bn to be invested in the UK this year, £200m of that will go on store refurbishments, with 400 stores getting £500,000 each this year and the remainder of the 2,800 stores seeing improvements in the following two years.
The changes aimed at “improving the shopping trip” will include warmer colours in stores, better signage, improved lighting and even sliding doors on fridges, which will help make the aisles less chilly.
At the same time Clarke confirmed he was slamming the brakes on expansion, with space growth down 38% on the previous year, a whopping £500m reduction in its capital expenditure, with the onus on convenience stores and supermarkets, rather than hypermarkets.
Q: What about Tesco’s investment in staff?
A further £200m will be ploughed in this year to improve service, including the recruiting of more than 8,000 additional staff in the UK. Clarke revealed trials in 200 stores where extra staff and training have been carried out had reaped rewards, with a 1.1% uplift in sales.
Extra staff will not be confined to fresh aisles but also to bakeries and drinks aisles, he said, with Tesco prepared to cut the margins substantially from each stores. “We are going to take less profit out of every store,” said Clarke. No more “running hot”.
Q: What is Tesco doing to improve quality?
With the launch of Tesco’s new Everyday Value range having only just begun, Clarke revealed it would also be pushing ahead with re-launches of the standard and Finest ranges. The moves will begin this year but Clarke would not commit to a timeframe.
He did say that Tesco would be expanding its use of an ‘affluence’ strategy, exclusively revealed by The Grocer in January, which would see ranges in-store increasingly vary depending on the relative wealth of the areas they are located in. This would also include ranges of ethnic foods, a greater proportion of Finest in rich postcodes and more budget line-ups in hard-pressed towns… but not, Tesco claims, dual pricing.
Q: Will Tesco quit the US?
Clarke said Tesco would be “incredibly restrained” about future expansion – not the retreat from the US some shareholders have been calling for. He said there would be no more targets for when Fresh & Easy will into full-year profit and admitted investors remained to be convinced, despite 30 of 186 stores now trading in the black.
Q: When will he get a new CEO?
“Less than ideal” was Clarke’s own verdict on the management shake-up brought about by the departure of UK boss Richard Brasher and his decision to take on the duties himself. Clarke stressed there could be but one captain of the team but behind the scenes Tesco are frantically scouting for a new centre forward.
Q: Is online domination the way ahead?
Clarke said plans for two more ‘dark stores’ in London, dealing only with online orders, would be followed by others in Oxfordshire and the West Midlands. He unveiled plans to add a further 700 click-and-collect pick-up points to its stores over the next year, almost doubling the existing number. Tesco has also launched its online Marketplace, competing directly with Amazon.
Clarke also strongly hinted that its marketing makeover, which sparked a pitch for a new advertising agency, would see a huge switch in emphasis to online. When Clarke first took over the reins at Tesco he stressed digital was key to its future.
Much has changed since then in Tesco’s fortunes but that, at least, remains the same.