Business

Tesco unveils profits rise and £1bn investment in UK

  • 18 April 2012
  • From the section Business

Tesco will invest £1bn in its UK business this year in an attempt to revive its flagging domestic operation.

The company is accelerating the revamp of UK stores and promises to hire more staff. That follows falling sales and profits at the UK business.

Speaking about the company's problems, chief executive Philip Clarke said: "Tesco didn't put enough into the stores and maybe took a little out".

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

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

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

The company blamed, in part, an aggressive programme of discount coupons issued by its rivals.

To try to help reverse that decline, Mr Clarke took control of the UK business in March from Richard Brasher, who stepped down as UK boss.

Analysts say that Tesco's management has been distracted in the past few years by expansion in Asia and the United States and, as a result, the UK business has stalled.

"Whilst our international business is delivering excellent growth, contributing £1.1 billion of profit to the group, we fully recognise that we need to raise our game in the UK," Mr Clarke said in a statement with its annual results.

"As a result, we are committing over £1bn to make the UK shopping trip better for customers," Mr Clarke told BBC News.

Tesco said it had started taking on and training 8,000 staff for its existing stores. Some of them will be part of a new focus on fresh food departments.

The new jobs are part of 20,000 it expects to create over the next two years.

The company is slowing down its expansion programme in the UK, so it can focus on overhauling the existing chain.

"Tesco has had its knuckles rapped but it's clever enough to learn from this," said Phil Dorrell, a director at retail consultants, Retail Remedy.

"Its focus now is on consolidating and improving its existing portfolio, which even it admits has become pretty shabby of late.

We expect the recent spate of bad news to be more of a hiccup, not the beginning of a trend," he said.

Tesco's US supermarket chain, Fresh and Easy, narrowed losses to £153m last year and expects further losses this year.

The chain has 185 stores and will add another 45 by February 2013.

"The further changes we have been rolling out to the stores, as we adapt the offer better to the needs of local customers, have been very well-received," Tesco said.

"These include introducing in-store bakeries, loose produce, additional ranges in grocery, as well as many new Fresh & Easy products."

Profits in Asia rose by almost 22% to £737m.

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