Tesco Surrendering On Much Of Its Non-Food Strategy

After pursuing an aggressive non-food business for more than 10 years, the U.K.'s largest retailer is giving up and Tesco plans on refocusing almost entirely on fresh produce.

"Customers were saying they felt we didn't have the right products in our shop," Kiran Sudan, store manager at the recently refurbished Kensington superstore in West London, told Reuters.

Floor space for general merchandise, such as electrical items, has been cut by over two-thirds at her store, part of Tesco's fresh food drive, which has introduced an additional 2,000 grocery lines and a recognition that the future of non-food retail is largely online.

The 94-year-old, $100 billion chain—with about 500,000 employees globally—has been a consistent money-maker for much of its life, until last January, when it issued its first profit warning in more than 20 years. Tesco management said the biggest cause has been overexpansion, particularly in areas such as non-food that were untraditional moves. "We've run too hot for too long," said CEO Phil Clarke.

Last April, Clarke launched a billion-pound plan to reverse years of underinvestment in existing British stores and stem a steady loss of market share to rivals like Wal-Mart's Asda and J Sainsbury. Tesco is the world's third-largest retailer after Wal-Mart and Carrefour. Its 3.6 million square meters (39 million square feet) of floor space still accounts for 1 in every 10 pounds spent in British shops, but it is switching from a space-hungry, expansionary business to one focused on making the most of existing stores, improving returns on investment and better cash generation.

For more:

-See the Reuters story

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