Tesco says UK recovery plan showing promise

Tesco , the world's third-biggest retailer, said a recovery plan to recapture home market share was making an impact after a shock profit warning, backing up industry data showing evidence of success in its fight-back against rivals.

Once one of the most consistent British companies in terms of earnings growth, Tesco stunned investors in January with its first profit warning in over 20 years.

In April it said it would invest 1 billion pounds ($1.63 billion) in its UK business to stem a steady decline in UK market share to Asda, Sainsbury and Morrisons .

In June Tesco reported a 1.5 percent fall in first quarter underlying UK sales.

Tesco is not due to update on second quarter trading until Oct. 3 but monthly industry data from market researcher Kantar WorldPanel has shown its UK grocery market share has stabilised, though analysts say the firm has been promoting aggressively.

Britain's largest retailer, which accounts for about one in every 10 pounds spent in UK shops and makes over 70 percent of its trading profit there, said it has recruited more staff, increased training, smartened its stores and invested more in lower prices, better quality products, marketing and its internet, smartphone and "click & collect" services.

"We're really pleased that we're starting to see the green roots of progress but it is early days and we've got a huge amount still to go after and to do," David Hobbs, Tesco's UK operational strategy and business planning director told reporters on Monday.

He was speaking during a media visit to a re-fitted Tesco superstore in Bishop's Stortford, 30 miles (50 km) north east of London.

Tesco said in April it planned to refit 25 percent of its UK selling space, some 430 stores, this year.

"We're on track to do that," said Chief Executive Philip Clarke.

He noted that the UK business had increased its weekly man hours by 300,000 since April, reflecting 8,000 additional permanent staff. Over 200,000 staff had been re-trained and over 100,000 given new uniforms.

Tesco has also revamped its meat, fish and bakery counters and is trialling hand made pizza, pies, salad and patisserie offers.

With Britain in recession many retailers have been finding the going tough as disposable incomes are squeezed by government austerity measures and with wages growth not keeping up with rises in prices, particularly in fuel.

However, UK retailers performed better than expected during the Olympics in August, bolstering prospects that consumers might help return the economy to growth.

Shares in Tesco, down 7 percent over the last year, were down 0.7 percent at 337.6 pence at 1339 GMT, valuing the business at about 27.1 billion pounds.

Source: in.reuters.com

Publication date: Tue 25 Sep 2012