Tesco group finance director Laurie McIlwee and group chief executive Philip Clarke faced a grilling from the press after the grocer reported its worst Christmas trading for decades today. Clarke talks the Big Price Drop, a move away from large superstores and why the retailer is not crisis. Alex Lawson reports

What went wrong - did the Big Price Drop go far enough?

Philip Clarke: Big Price Drop went far enough for sure. It is an important first step. We have had increases in volume but [we also] have differentials in price. There was a lot of promotional couponing at Christmas elsewhere.

When can we expect to see the Big Price Drop show positive results? 

PC: We are going to embed the Big Price Drop in the way that we work in the UK. To be a retailer…you need….to offer low prices on the products people buy every day. We have taken the big and important first step and we will now build on it.

Did the Big Price Drop increase volume sales?

Laurie McIlwee: Kantar data shows Tesco volumes went up 1.5% in the four weeks to Christmas day. We have more customers, not just people putting more in their baskets.

What will you be investing in in the future?

LM: We could have invested in price over two or three years but it’s a sign of the times that we are doing it now. It’s positive. We hear people saying we’re in crisis but we feel in control with a good plan to return to real growth next year.

What is happening to the consumer internationally?

PC: Consumer confidence in every market we trade in is turning down. Who knows what will happen with the Eurozone and the outlook for the global economy?

Do you feel like you’re in crisis?

PC: No. I feel like I’m in control. I have taken a decision that needed to be taken to get the UK moving. We will create more jobs next year. We will improve our profits next year. This is not going to kill us, it will make us stronger. We are not going to be an also ran, we are going to be the leader.  

What’s happening with Fresh & Easy in the US?

There’s still parts of inland California where new housing estates were built and we were promised there would be residents. We just do not have enough customers in the catchment. Our goal is to double the stores we are mothballing and get the US to break even and beyond.

Can we expect any further changes at board level?

There’s been a big change in the team in the last year but we do not expect any further shake ups.

Was filling Terry Leahy’s shoes a poisoned chalice?

Not at all. There isn’t a retail chief executive in the UK that has inherited so many operations to grow around the world.

What are your plans for space growth?

PC: You can go on growing space but we probably won’t be growing very big hypermarket space any more. We have got a few hypermarkets coming but will be announcing more on the bias of stores in April.

How do you expect the balance of stores and online to progress?

PC: The internet is starting to make a lot of non-food sales. [Moving away from hypermarkets] will be the direction we will be heading. The question is do you really need to build large hypermarkets in the UK when you can click and collect? I’m not calling for the end of hypermarkets - we are opening further large stores - but they will be largely complementary to non-food.

What will you be improving in store?

PC: We want to invest in, and improve, the shopping trip and make it better. We sell more fresh food than anybody else in the UK and we are very pleased with our range but we need to make sure it’s in every store, every day. In store you will notice there is more focus on category management and great personalisation.

What next?

PC: The first thing that is needed to be done is to sharpen our pricing and we need to step change the performance of the UK business and improve service. We have made a very significant investment and given ourselves the headroom to do the things that we want to do.