Tesco hits the accelerator on store revamps as sales drop

Tesco chief executive Philip Clarke has declared 2014 “the year of the hypermarket” as he revealed the retailer was planning a massive rollout of the pilots trialled in areas such as Watford.

The UK’s biggest retailer today faced questions over the speed of its UK turnaround programme, as UK like-for-like sales excluding fuel dropped 0.5%. There was better news in food sales, which inched up 1% in the second quarter.

“Next year will be the year of the hypermarket. You can expect us to do 60-75, which is effectively one a week”

Philip Clarke

Clarke said Tesco had been buoyed by sales uplifts of between 3-5% in the larger stores it has revamped, although he admitted that just eight hypermarkets have been relaunched since its £1bn UK turnaround programme began in 2012.

Clarke said the success of trial stores including Watford, Purley and Coventry, which have outstripped sales elsewhere, had convinced the retailer it was time to push the accelerator button on the programme.

“Next year will be the year of the hypermarket,” Clarke told The Grocer. “You can expect us to do 60-75, which is effectively one a week.”

David Gray, analyst at Planet Retail, said: “I think it’s very important for them to accelerate the process. To do as many as 75 next year is a huge increase and it might be slightly ambitious but they are right to make it a priority.”

Some analysts claim the store revamp programme has been held up by questions over what to do with the hard-hit general merchandising offering, and how to incorporate new features such as the Giraffe restaurant chain and the Harris + Hoole coffee business.

Overall UK profits rose 1.5% in the first half, Tesco revealed today, but profits fell in Europe, Asia, and at Tesco Bank – resulting in a 24.5% fall in statutory profit before tax, to £1.39bn. Group sales rose 0.5% to £35.6bn.

Hudl

Meanwhile Clarke revealed positive early signs for the retailer’s new Hudl tablet, which went on sale on Monday – saying it had sold 35,000 units in two days.

Clarke admitted it would soon be “a bit short of stock” but said it was banking on big sales for Christmas.

Analysts have already said that Christmas sales will be more crucial than usual for Tesco, especially with its performance being dragged down by what one described as “atrocious” performance in several European markets.

Later today Tesco will reveal more details of its £345m plans to gain a 20% stake in Chinese giant China Resource Enterprises, which Clarke claims will give it a major foothold in what he called “the world’s most exciting market”.