Tesco is to revamp UK stores and create more jobs, but has also said it will rein in expansion.

The retailer is seeking to win back the confidence of its shareholders, following a profits warning in January, its first in 20 years. Tesco also said its Fresh & Easy U.S. business would break even later than previously anticipated. Analysts said that Tescos had been distracted by expansion in Asia and the United States and, as a result, the UK business stalled.

The company said on Wednesday that it will spend £1bn on revitalising its current market, with a focus on improving staff levels and smartening up stores.

The decision to reign back expansion will come at a price - group capital expenditure will be cut from £3.8 bn to £3.3 bn in the coming year. However, chief executive Philip Clarke said that it was part of the plan to "put the heart and soul back into Tesco".

Pre-tax profits rose 5.3 per cent to £3.8bn in the year to February, helped by £1.1bn of profit from its overseas businesses, the first time it has made more than £1bn from its non-British supermarkets.