In the money: Tesco looks online as clothing sales fall
At the same time as Tesco revealed falling clothing sales over the Christmas period, the UK's largest supermarket retailer also signalled a shift away from expanding its hypermarket presence and a renews focus on its online offer.
Finance director Laurie McIllwee told just-style that clothing sales were "tough" over the Christmas period, recording negative like-for-likes as the warm winter worked against "big offers" around winter items like coats.
The comments on Thursday (12 January) came as the retailer recorded a 1.3% drop in UK like-for-like sales excluding fuel but including VAT, for the six weeks to 7 January. Tesco's total UK sales, including VAT but not fuel, were up 1.7%.
Chief executive Philip Clarke also pointed to a shift in Tesco's strategy, saying the company will open fewer big out-of-town hypermarkets. "We can go on growing space but we probably will not be growing the very big hypermarket space anymore. We have got them in lots of good locations. There are more to come. [But it is here] that we will see an amelioration or a modification," said Clarke.
Indeed, he suggested the internet would offer an increased focus for the operator's non-food offer. "Do you need to build hypermarkets in the UK when the internet is taking so much growth in electricals, in clothing, in general merchandise?" he asked.
This shift is going to see the retailer increase its focus on its online offer, with plans to extend its online clothing division in the next year.
"We do see clothing as a very big category for us, both instore and online. We've only got a very small online clothing presence at the moment and we've got big plans to make that much bigger next year," said McIlwee.
In control, not crisis
As the retailer saw 15% of its share price wiped out on Thursday, the Tesco chief emphasised that the company was not in crisis. Indeed, he noted the decision to "accelerate the rate of improvement" in its UK operations was necessary to ensure the it was a "leader for customers and for shareholders".
Clarke was also bullish on the his ability to turnaround the business. "I feel like I'm in control. I feel like I have taken a decision that needed to be taken to get the UK business doing more of the right things for customers," Clarke said. "I feel very determined. This isn't going to kill us. This is going to make us stronger.
"It's hard to take on the day, but it's absolutely the right thing. There's been a lot of soul-searching this week about whether we go as far as we've gone. The truth is, we had to. We're not going to be an also-ran, we're going to be a leader. A leader for customers and then we will be a leader for shareholders."
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