Tesco, the UK's largest retailer, today (18 April) revealed that it has been working to improve its clothing offer after it recorded a drop in full-year profit across its UK operations. 

Chief executive Philip Clarke said clothing is one of the elements that will be targeted as part of a new GBP1bn (US$1.59bn) investment aimed at revitalising its sagging domestic business.

He told just-style that the retailer has had a new team working on its clothing range for the past seven to eight months.

The comments came as the supermarket giant booked a 3.9% fall in general merchandise, clothing and electricals sales in the UK over the year to 25 February. However, internationally, the clothing channel has seen stronger growth, with sales up 12% in Central Europe, which the retailer attributed to the particularly "strong performance" in its reformatted Extra hypermarkets.

Clarke said there has also been good growth in UK online sales, and that the retailer has "really pushed much harder on F&F in the stores," describing the clothing brand as the "majority of which we sell".

The retailer plans to phase out its Tesco Value clothing line, which will be replaced by F&F Basics, "following the model from Europe", said Clarke.

As the operator shifts to a more fast fashion focus, it is increasing its use of near sourcing.

Clarke said the retailer has set up "quite a few buying hubs around the world staffed by Tesco people", with recent openings in Morocco and Egypt. He added it it is also looking at similar moves in "other places around the world".

As part of its UK turnaround plans, less new space will be devoted to general merchandise, clothing and electricals.

Speaking about Tesco's future general merchandise strategy, Clarke said it will be "tighter because it's going online faster", and "clothing might need a bit more space in the future".

However, there will be "no major re-allocation of space between clothing and GM (general merchandise) this year for the existing stores".

Six-point improvement plan
The changes were revealed as the retailer announced a GBP1bn, six-point plan to improve customer experience in the UK after its domestic profit fell 1% to GBP1.5bn.

The six pillars include service and staff; stores and formats; price and value; range and quality; brand and marketing; and clicks and bricks.

Speaking about the drivers behind the shift, Clarke emphasised that while the UK business is "far from broken", it "wasn't as good as it could be".

"Good enough is not good enough," he said, adding "their expectations have moved on and we haven't".

In general, he believes the industry has been "running up the down escalator for too long," opening too much new space and too many new big stores, while shoppers increasingly move online and back to the high street.

The plans will cover six elements:

• Service and staff - more staff for existing stores, initially in its fresh food departments;
• Stores and formats - a faster store refresh programme, with stores to have a warmer look and feel;
• Price and value - better prices and promotions with more personalised offers;
• Range and quality - better ranges, with the relaunch of the Tesco brands;
• Brand and marketing - better, clearer, more relevant communication with customers; and
• Clicks and Bricks - click and collect roll-out, transformation of its range and online presence.

Commenting on the today's announcements, Conlumino lead consultant Matt Piner said: "The largest shift is undoubtedly the heralding of the end of the 'race for space'.

"Tesco's expansion and land grabs were essential in its rise to the top, so any move away from this is highly significant.... Tesco is reining in UK space growth and switching focus to improving existing stores, with a target of refreshing 430 outlets in 2012/13.

"These improvements will revolve around making the shopping journey more experiential and enjoyable, rather than the rather soulless, big box, environments that many of its larger stores provide."

Click here to read more analyst comments in 'Tesco FY and turnaround plan: what the analysts say'.