Tesco bets on big-store revamp to boost UK recovery plan

LONDON Thu Aug 8, 2013 10:50am EDT

LONDON Aug 8 (Reuters) - Tesco, the world's number three retailer, is hoping the allure of casual dining, coffees and even yoga will help tempt Britons back to its retail park stores as part of a 1 billion pound ($1.55 billion) push to revitalise business.

Like other retailers, Tesco, which makes about two-thirds of its revenue in Britain, has seen online shopping, rising petrol prices and weak consumer spending curb the need for its largest stores and their big ticket items, with supermarkets now betting more heavily on online and smaller local convenience stores.

To tempt shoppers back into their cars, Tesco is reinventing some of its near 250 out-of-town stores into leisure destinations for families. Unused space is being developed to house everything from artisan coffee shop Harris + Hoole and an upmarket bakery, to a clothing department, restaurant chain Giraffe and community space for Yoga and baby classes.

"Although it has served us well for two decades, we know we need to change destination retail going forward," Tesco Extras Managing Director Tony Hoggett told reporters on Thursday at its Watford, Hertfordshire, store, the first to house some of the new concepts.

In April Tesco posted its first profit fall in two decades, wrote down the value of its global operations by $3.5 billion and confirmed plans to exit its loss-making business in the United States, after five years trying to crack the market.

The firm has struggled more than many UK rivals in part because it sells a higher proportion of non-food goods than other grocers and also due to years of underinvestment that saw it lose ground to rivals J Sainsbury and Asda.

Other concepts being trailed include nail bars, hairdressing areas and gyms. It will open two more revamped stores next week.

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