“I come here every day,” said Ms. Goodwin, 84. Her favorite spot was the Harris and Hoole coffee shop — inside a Tesco Extra hypermarket in Watford, a town just north of London. “It’s incredible what they’ve done. They must have spent an awful lot of money.”
Yes, they have. Tesco, the British supermarket giant that has stumbled in recent years by venturing overseas, is investing £1 billion ($1.6 billion) in hopes of turning its biggest stores in Britain into shopping destinations.
Under pressure to revive sales and win customers, Tesco is using lures like gourmet coffee bars, restaurants and even nail salons and yoga studios to bring people back to its stores and reverse a declining market share.
“There’s no doubt that the heartbeat of Tesco is in the U.K., and if the core doesn’t perform it doesn’t matter what the rest does,” Clive Black, an analyst at Shore Capital, said. “For a company the size of Tesco, fixing this is a time-consuming and painful exercise.”
Tesco, the third-largest supermarket chain, after the American global giant Wal-Mart Stores and the French multinational Carrefour, had hoped that expanding abroad would elevate earnings and lift its share price. The outreach included starting the Fresh and Easy grocery chain in the United States. But Fresh and Easy flopped, and Tesco struck a deal on Tuesday to sell most of those stores to an affiliate of the money-management firm run by the American billionaire Ronald W. Burkle.
Even in Britain, Tesco’s larger stores have increasingly become a burden as more people shop online and price promotions alone are not enough to keep customers.
Tesco’s pretax profit was down by more than half for the financial year that ended in February after it took £2.4 billion ($3.8 billion) in write-downs, including for its Fresh and Easy venture. Pretax profit fell to £1.96 billion, from £4 billion a year earlier. Net income for the period was £120 million.
The company remains Britain’s largest grocer, but its market share slipped below 30 percent in March, with customers straying either to less expensive stores or to more upscale food emporiums.
And though the share prices of its main rivals, Sainsbury’s and Morrisons, gained at least 9 percent since 2010, Tesco’s share price fell. More recently, though, Tesco’s stock has started to revive, as investors evidently see potential in the refocused effort on its home turf.
Tesco’s retreat from the United States market through the sale of Fresh and Easy is part of its plan not only to concentrate once more on Britain but also to seek opportunities in faster growing places like South Korea, Malaysia and Thailand.
“The sale leaves management to refocus on its existing territories, including its home market,” Keith Bowman, an analyst at Hargreaves Lansdown, said Wednesday.
As part of its British revamping, it opened three refurbished hypermarkets under the Tesco Extra brand last month, including the one in Watford, and is planning at least six more. The stores will vary slightly, depending on their location, but many will include Giraffe, a child-friendly restaurant chain Tesco acquired for £49 million in March, or Decks, a meat-menu carvery restaurant chain that Tesco recently created.
The Watford store covers 80,000 square feet, including the Harris and Hoole coffee shop that is part of a chain partly owned by Tesco, and Euphorium Bakery, an artisan bread and pastry shop that has a partnership with Tesco. Separate sections are reserved for F+F, Tesco’s own clothing brand, and consumer goods like bicycles, children’s car seats, vacuum cleaners and fresh flowers.
“Today’s customers have more leisure time and they’ve told us that they want a real experience,” Philip Clarke, Tesco’s chief executive, said by e-mail. “They want space to browse, places to eat and great food. And they want big stores to be more welcoming.”
Article source: http://www.nytimes.com/2013/09/12/business/global/after-taking-a-beating-overseas-tesco-seeks-comfort-at-home.html?partner=rss&emc=rss