Tesco chief executive Philip Clarke plans to slash spending on its UK expansion as the UK’s biggest supermarket aims to claw back declining market share.
The firm will spend no more than £2.5bn a year for the next three years which is the lowest level for 10 years. This compares with a £6.6bn spending at its peak in 2008/09.
Speaking at an investor conference, Clarke said he would invest £200m into cutting prices and would cut new store space to 700,000 sq ft from 1.4m sq ft in 2014/15 in his latest turnaround plan.
“Our performance has not been what we wanted it to be,” he said. “Prices in the UK have been too volatile for too long. I am committing to lower, more stable prices on the products that matter most to customers. Promotions have been too complicated and it is an industry-wide problem that we intend to solve. We are putting more money into more stable pricing.”
The announcement will be seen as a direct response to Asda’s pledge to spend more than £1bn on price cuts. Tesco will open more click and collect locations and will introduce one-hour delivery slots.
He said Tesco will open 150 convenience stores a year and refresh about 450 stores a year.
Clarke also praised rivals Aldi, Lidl and Waitrose for the way they have exploited their niches and admitted that Tesco has lost business to them.
Tesco has been squeezed by up-market rivals Marks and Spencer and Waitrose as well as discount retailers but Clarke argued it could still be “the broadest church and yet the most targeted retailer”.