April 18 - Tesco, the world's No.3 retailer, said it would spend 1 billion pounds ($1.6 billion) this year overhauling its underperforming British business and will rein in expansion as it seeks to win back market share and calm nervous shareholders. Hayley Platt reports.
It's been a difficult year for the world's third largest retailer. In January Tesco issued it's first profit warning in two decades after poor Christmas sales. Now it's reported only a modest 1.6 percent rise in pre-tax profit for the year to 3.9 billion pounds. Sales were also down. But Tesco is fighting back. It's Chief Financial Officer is Laurie McIIwee. SOUNDBITE: Laurie McIlwee, Tesco Chief Executive Officer, saying (England): "We've put together a very substantial plan and it's a billion pounds of investment in the UK this year, incremental to last year. We've tested a large part of it. So 200 stores were tested quite robustly through to the end of last year, mainly around improving service, putting more staff into our stores." Tesco operates 5,300 stores in 14 countries. It plans to create 20,000 new jobs over the next two years. But says it will slow down expansion plans in Britain and concentrate on overhauling existing stores. Himanshu Pal from Kantar Retail says it's about time SOUNDBITE: Himanshu Pal, retail analyst, Kantar Retail, saying (English): "These are good steps and likely to help Tesco turn around its fortunes over the long period but people who are expecting overnight results will be disappointed. It only takes one bad shopping trip to disappoint a customer but it takes much longer to retain the trust." Tesco has stores in Asia and America and it's U.S. chain Fresh and Easy launched four years ago still hasn't made a profit. But one in every 10 British pounds is spent in Tesco and many analysts are confident its international business will grow. SOUNDBITE: Himanshu Pal, retail analyst, Kantar Retail, saying (English): "Considering the current performance of Carrefour and some of the pressure exerted by the Carrefour share holders in terms of higher returns on investment, we could see Carrefour divesting some of its portfolio in Asia that could help Tesco get to the number 2 stop in the next five years." Shares rose almost two percent after the announcement but they've lost more than 22 percent of their value in the last six months. And analysts say it could take up to two years to turn the business around. Hayley Platt, Reuters.