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* CEO wants UK turnaround plan to move faster
* CEO effectively abandons UK operating margin target of 5.2pct
* CFO says firm does not want to give "false sense ofprecision"
* Plans to invest additional 200 mln stg on UK price cuts
* Tesco shares close up 0.5 pct
By James Davey and Neil Maidment
LONDON, Feb 25 (Reuters) - Britain's Tesco, theworld's third-largest retailer, is to cut prices as it relaxesits view on operating margins and steps up its store revampprogramme and investment in online and convenience channels.
Outlining his plans at an investor and analyst seminar onTuesday, Chief Executive Philip Clarke said the measuresaccelerate a turnaround plan aimed at countering increasedcompetition in the British retail market, but which has so farfailed to boost its languishing sales.
"This doesn't signal a need for a new strategy, simply to gofaster," Clarke said.
He effectively abandoned Tesco's target for a UK operatingmargin of 5.2 percent, the highest in the industry, by saying"the margin will be what the margin will be."
At a later media briefing Chief Financial Officer LaurieMcIlwee said the firm would not be giving a new target becauseof uncertainties in the grocery market due to more competitionand structural changes.
"If I was to give you a margin it would be a false sense ofprecision. We need the space to operate, we don't want to bebacked into a corner," he said.
While not signalling a return to the "pile 'em high, sell'em cheap" mantra of Tesco founder Joseph Cohen, sacrificing thetarget signals that Tesco will make less profit from its revenueas it chases higher sales volumes with lower prices.
In common with Britain's three other leading grocers -Wal-Mart's Asda, Sainsbury's and Morrisons - Tesco is being squeezed between the hard discountersAldi and Lidl and upmarket grocersWaitrose and Marks & Spencer, losing marketshare.
A commitment to reduce promotions and invest an additional200 million pounds ($334 million) cutting prices on basicproducts like carrots and cucumbers will be seen as a directresponse to the rise of the discounters as well as moves by itsbiggest rivals. Asda, for example, has pledged to spend morethan 1 billion pounds on price cuts over the next five years.
BOLDER AND BRAVER
Tesco is 22 months into the turnaround programme for its3,150 British stores, having already spent more than 1 billionpounds on refits, more staff and new product ranges, yetunderlying sales at stores open over a year fell 2.4 percent inthe Christmas period and, according to monthly industry data,have continued to fall.
Shares in Tesco, down 10 percent over the past year, werelittle changed by the close, finishing up 0.5 percent at 335.7pence, valuing the business at about 26.9 billion pounds.
"If there is no data showing (the) current plan works, whyaccelerate the plan," asked Bernstein analyst Bruno Monteyne.
"They need to be bolder and braver," he said.
The overall approach to growth and returns set out last yearremains the same, Clarke said, targeting mid-single-digit annualgrowth in trading profit, return on capital employed (ROCE)within a range of 12-15 percent and dividend growth broadly inline with underlying earnings, with a target cover of more thantwo times.
Tesco, which makes about two thirds of its revenue inBritain, has suffered more than many rivals because it has morelarge stores and traditionally sold a higher proportion oflarge-ticket non-food items, such as domestic appliances, whereshoppers cut back most in an economic downturn.
To address that, Clarke has refocused the company's non-foodoffer on higher-margin categories, such as clothing andhomewares, though only about a third of its huge Extra storeshave been refurbished so far. Tesco said the Extra format willbe a priority for 2014, with 110 slated for refits.
CONVENIENCE STORES
Clarke also plans to open 150 convenience stores a year,while other initiatives include a planned doubling ofclick-and-collect locations and the expansion of a schemeallowing loyalty card holders to save money on fuel.
The group, which trails France's Carrefour andU.S. giant Wal-Mart in annual sales, also said it wouldreduce net new space significantly, resulting in lower overallcapital expenditure.
Having given guidance for net new UK space of about 1.4million square feet for 2013/14, it plans a further reduction to0.7 million sq ft in 2014/15.
Group capital expenditure will drop to no more than 2.5billion pounds a year, its lowest level for 10 years, for atleast the next three financial years. Tesco had previouslyindicated a figure of 3.2 billion pounds for 2013/14.
Other big European retailers like Carrefour and Metro, facing many of the same challenges as Tesco, havealso slashed capex in recent years but have both started toincrease investment again, although they are still spending lessthan Tesco as a percentage of sales.
Clarke reiterated that the pursuit of disciplinedinternational growth remained a priority. On Monday Tesco saidit was in talks about a possible restructuring of its businessin Turkey.
"Overall this is the 'middle way' message we expected ...nothing that should cause panic across the industry," DeutscheBank analyst James Collins said.
