Tesco slows expansion plans

Retail giant to redirect focus away from supermarkets to smaller stores following shock profit warni

New Statesman
Photo: Getty Images

Following its profit warning in January - the first for the company in 20 years - Tesco is set to slow down its UK expansion plans as part of a new strategy. Tesco's CEO, Philip Clark, is expected to annouce next week it will scale back on plans to grow its network of "hypermarkets" and expand the size of existing shops.

Instead, Tesco is expected to focus more on smaller stores and its online business - particularly in non-food products and services - in a move that other British retailers will very likely follow. Analysts at Nomura, an investment group aligned with Tesco, told the FT:

We expet Tesco to signal a phased reduction in its rate of UK space growth, with a shift in emphasis away from large hypers towards smaller formats.

Another of Tesco's joint brokers, JP Morgan Cazenove, said the company could spend £800m over the next two years on its refurbishment programme. Another Nomura analyst predicted Tesco's UK capital expenditure could shrink by £200m to £1.3bn.

Britain's largest retailer shocked the market in January this year when it issued its first profit warning in two decades following poor trading over the Christmas period. Tesco's profits for 2012 were forecast £450m lower than expected. Clark, who at the time had been company CEO for less than a year, denied its UK business was in crisis, saying: "I feel very determined. This is not going to kill us. This is going to make us stronger."

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