The chief executive of Tesco is confident the supermarket will tempt back customers over the coming months.
Philip Clarke confirmed plans to reduce prices and give stores facelifts rather than opening new branches, as the food retailer market continues to be competitive.
Speaking to investors, Mr Clarke explained the company only plans to open around 65,000 square metres of new space in the coming year - around half the amount of new space opened in 2013.
Instead, he explained the retailer will focus on the growing trend of customers who are preferring to shop in smaller stores or using online services. It does mean some sites that have already been acquired by the company will never be built as people become disillusioned with the hypermarket-style experience.
One of the biggest plans by the chief executive is to reduce Tesco's profit margin of 5.2 per cent as it attempts to gain back market share via a price war.
"It's all going to be a response to where we are, to the market, to the opportunity, to the fact that the leader needs to lead," said Mr Clarke.
He added: "In my 40 years here I have never known such a level of competitiveness as I see today. Everyone is on deal all the time, everyone is shouting about price."
It is expected around £1 billion will be set on giving stores a makeover and there will be an increase in staff levels in the shop floor, as well as more promotions to tempt shoppers in.
So far, the company has revamped 615 of its 2,600 stores in the UK and expects to complete the refurbishment plans by 2017.
The decision to cut prices and change strategy follows a disappointing festive season for the retailer, with like-for-like sales down 2.4 per cent in the six weeks to 4th January.
Market analysts have already cut back their profit forecasts for Tesco this year, with a drop from £3.5 billion to £3.3 billion expected.