Tesco is to scale back DIY products, car accessories, small home appliances, and toys in store as the grocer’s non-food categories pulled down performance in its first quarter.
Tesco group chief executive Phil Clarke said: “We’re actively withdrawing from non-food categories such as consumer electricals, they don’t make much of a profit contribution. It will hit our top line but we’ll still make more profit selling food or a better range of general merchandise in the same space.”
He added: “We have narrowed [the offer] down to those categories that customers say make sense to them when they are shopping for their everyday food shop.”
The grocer will continue to sell the full non-food offer online but will devote the space in-store to health and beauty, and clothing, which it said “once again delivered a strong performance”. However, Tesco chief financial officer Laurie McIlwee said it take time to reallocate space.
Tesco reported UK like-for-likes excluding VAT and petrol fell 1% in the 13 weeks to May 25, below analyst expectations.
McIlwee said: “The decline in like-for-likes in the UK is pretty much all to do with the decline in general merchandise and non-food. Our food category performed well.”
Clarke said Tesco’s recently opened 80,000 sq ft store in Gateshead store reflected work done on space allocation, where general merchandise takes up just two thirds of the space it would normally, with an expanded health and beauty, and clothing offer.
Clarke said as it remodels further large Extra stores to meet customer demand they will be “vibrant and striking and more of a destination than before”.
The UK’s largest retailer said it reported “positive and improving” like-for-likes in all food categories except frozen and chilled convenience, which was hit by the horsemeat scandal. Clarke said: “We’re through that sales impact now.”
Clarke insisted that the UK turnaround was “on track” despite the decline in sales. “We set out a plan a year ago, it isn’t a plan for a quarter or for a year, it’s a long-term plan and we’re making progress,” he maintained. “There’s lots for us to do to build a better Tesco in the UK, and that’s what we’re doing.”