Tesco supermarket. (Photo: Stock File)
Tesco tries to reverse revenue fall
Friday, October 05, 2012, 23:50 (GMT + 9)
Tesco is introducing a drive-through service in an effort to amplify sales and reverse the group's 11.6 per cent profit drop to GBP 1.66 billion (EUR 2.1 billion) for the six months to September compared to last year – the first in 18 years.
With the new system, shoppers using “click and collect” will buy their items online and pick them up from one of 150 designated stores.
Tesco is also trying to sell some of its Extra supermarkets and rent out space in others.
All these measures are meant to fight back against a squeeze by rivals plus cutbacks by shoppers, Daily Mail reports.
The only good news has been a rise in UK sales of 0.1 per cent over the last three months compared to a year ago -- which still falls behind Sainsbury’s, which this week announced a 1.9 per cent rise in like-for-like sales for a comparable period.
The chain has already slimmed down some of its retail space by allowing third parties, such as the restaurant chain Nandos, to open franchises in its shops.
In better times of growth, Tesco branched out to every corner of the land. It surpassed Sainsbury’s to become the country’s biggest supermarket in 1995.
Tesco’s new GBP 1 billion (EUR 1.24 billion) turnaround plan includes bombarding homes with money-off vouchers and its drive-through service. The latter involves a GBP 2 (EUR 2.49) fee, which Tesco believes customers will pay.
The grocer has introduced 1,800 new products and revamped 1,850 more, as well as re-released its cheapest Value range as Everyday Value. Sales have risen 10 per cent as a result.
In Bishop's Stortford, the historic market town in Hertfordshire, Tesco is testing initiatives in a handful of stores: an increase in space dedicated to food from 77 to 87 per cent, a new fish counter and sloped shelves to improve visibility. The format will eventually be rolled out to 25 per cent of outlets.
Tesco has seen a 12 per cent-slide in trading profit in the UK to GBP 1.1 billion (EUR 1.4 billion). International profits, harmed by the global financial crisis, fell 17 per cent to GBP 378 million (EUR 470.4 million).
Tesco Chief Executive Phil Clarkesaid the turnaround plan will slash profits only in the short term and result in long-term rewards.
“I wouldn’t say we’ve turned a corner, but we’re definitely on the road,” he added.
But John Ibbotson, director of retail consultancy Retail Vision, is sceptical.
“There is little sign the Tesco supertanker is turning round. It has thrown a lot of money at the problem and produced only the hollowest of victories,” he reasoned.
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