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Tesco to prioritise clothing performance as general merchandise sales dip

Tesco is to prioritise the performance of its clothing division, as sales across its general merchandise, clothing and electricals department dipped 3.9% in the year to February 25.

The supermarket giant, which reported its preliminary results this morning, saw trading profit fall 1% to £2.5bn in the UK in the 52 weeks to February 25. UK like-for-likes excluding petrol and VAT fell 1.6% in the fourth quarter. In the year like-for-likes slipped 0.9%.

General merchandise, clothing & electricals sales in the UK were down 3.9% year-on-year on a like-for-like basis, reflecting a “challenging environment”, Tesco said.

As part of a wider turnaround plan to revamp the existing estate and slow down expansion, Tesco will reduce the space given over to general merchandise, clothing and electricals. It said that  improvements to ranging, merchandising, pricing and promotions are yet to come through this year.

Further “substantial changes” to product ranges, category emphasis and space allocation in stores will be implemented in the year ahead, it added.

While UK non-food was “a drag” on performance, clothing sales in central Europe increased by 12% at constant exchange rates, driven by the F&F brand and a strong performance clothing in reformatted Extra hypermarkets.

Tesco is to invest £1bn to turnaround its UK business this year as it gears up for an intense battle to win back market share.

Overall UK net new space growth will reduce by 38% this year. It will, however, ramp up its online business, rolling out click and collect and opening more dotcom-only stores in densely populated areas.

Statutory pre-tax profit was up 5.3% to £3.8bn, while underlying pre-tax profit edged up 1.6% to £3.9bn.

Group trading profit grew 1.3% to £3.8bn. The UK fall was offset by trading profit soaring 17.7% to £1.1bn in its international business.

Group sales, including VAT, increased 7.4% to £ in the year, or up 5.9% excluding petrol.

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