Clarke lays out £1bn battle-plan to revive Tesco’s ailing growth

Chief executive Philip Clarke will lay out his £1bn battle-plan for winning back customers on Wednesday as he attempts to turn the business around following a disastrous winter.

He will provide further details of a blueprint to halt the supermarket giant’s declining UK sales by lowering prices, hiring more staff and revitalising its jaded stores.

The need for action will be highlighted as the company is expected to reveal that underlying profits rose 1.7 per cent to £3.9bn in the year to February 25 – much slower than the 12 per cent growth in the previous year.

Mr Clarke, who took over from Sir Terry Leahy a year ago, is facing the biggest challenge of his career as he comes under pressure from shareholders to make drastic changes, such as quitting its loss-making Fresh & Easy chain in the United States and ditching its banking arm.

But it is thought he will ignore these calls and will focus mainly on a transformation plan for the UK supermarket business, whose market share earlier this year slipped below 30 per cent for the first time since 2005.

Mr Clarke has already revealed he plans to cram a three-year overhaul into the next 12 months, including a raft of initiatives dealing with online, price and home delivery.

He is expected to give an update on sales at 200 stores that have been given a makeover in an attempt to make them “warmer” and is set to deliver the go-ahead for the changes to be rolled out to the rest of its 2,865 outlets in the UK.

A new strategy is also expected to focus on permanently low pricing as well as more special offers, after last year’s £500m Big Price Drop flopped.

And investors will also be keen to hear about how Mr Clarke plans to revitalise non-food sales, which have been particularly badly hit by the squeeze in consumer spending, while a revamp of its online offer has also been mooted.

The group, which is the UK’s biggest private sector employer, last month announced plans to create 20,000 jobs over the next two years as it opens new stores and invests in upping the levels of customer service.

Matthew Truman, an analyst at JP Morgan Cazenove, believes Tesco has cut the average number of staff in stores by 24 per cent in recent years. He expects Tesco’s recruitment plans to cost £245m, most of which will be spent in the coming year.

And Mr Clarke will announce £792m of spending on refurbishing stores over the next two years, he believes, leading to a total spend of more than £1bn.

He expects like-for-like sales excluding fuel and VAT to be down 1.8 per cent in the final quarter of its financial year.