Tesco turnaround plan: prices cut, stores to close – business liveblog
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Version 0 of 1. 5.24pm GMT17:24 Closing summary: The Tesco turnaround has barely begun To sum up, Dave Lewis appears to have taken a lot of pretty sensible decisions. But the hard work has barely started. After just four months at Tesco, he’s shown enough nous to shut failing stores and cancel expansion plans that simply don’t fit the way people shop today. The price cuts are a no-brainer response to Aldi and Lidl, and clearly Tesco plans to bang the drum very loudly. Readers report seeing big adverts on roads near to their local stores; there may be no escape for a while.... But as my colleague Nils Pratley argues, this really shows how badly Tesco was being run before. He writes: Take a step back from the display of fireworks, however, and you realise how severely Tesco has lost its competitive edge over the last half-decade. Lewis’s plan to cut 30% from central costs is a spectacular confession of corporate flabbiness. Hiring Matt Davies from Halfords (a company worth £1bn versus Tesco’s £16bn) is an admission that an awful lot of retailing talent has walked out of the door over the years. And why on Earth was Tesco messing about with Blinkbox in the first place? The technology is neat but the business always looked completely unviable for an owner that lacked its own telecoms network. Nils’ full analysis is here: Tesco’s shakeup is a spectacular confession of corporate flabbiness These decisions have consequences too. Some local communities aren’t going to get the new supermarket they wanted. Other (hello Dartford) are left with derelict shop fronts, hoardings and no clue about what happens next. Thousands of staff are going to lose their jobs, and many more face uncertainty while the process of shutting stores and closing the Cheshunt HQ grinds on. And hundreds of thousands of shareholders are going to miss out on a dividend while Lewis tries to rebuild one of Britain’s biggest companies. And that’s all for tonight. Here’s some links to our Tesco coverage: Goodnight. GW 5.08pm GMT17:08 Tesco shoppers in South London weren’t as impressed by Dave Lewis’s grand plan as traders in the City, my colleague Sarah Butler reports: On a very rainy Thursday morning, just hours after Tesco chief Dave Lewis’s latest salvo in the supermarket price war, Howard Ricketts, a regular Tesco customer, said he had not noticed big savings at the till. While signs were hanging from the ceiling, prominently by the door, at the ends of aisles and dotted around shelves, shoppers were sceptical. “The prices haven’t dropped really, there are two-for-ones, but when you check them out it’s like you are paying the same price really. I don’t believe it,” said Ricketts. The new campaign would not tempt him to abandon his other regular grocery haunt, he continued. “It won’t make me shop here more. I think Iceland is cheaper.” Here’s Sarah’s full report: Underwhelmed in south London: Tesco shoppers react to latest price cuts Updated at 5.18pm GMT 5.02pm GMT17:02 Tesco’s value has jumped by over £2bn today, flags up financial PR pro Tony Cross: @graemewearden £2.2bn wiped onto #tesco share value…. 4.50pm GMT16:50 Here’s the latest list of planned Tesco stores that are being abandoned: Tesco have scrapped plans to open 49 stores. 35 of them are listed below. Is yours one of them? pic.twitter.com/rvHMzU5QWI 4.43pm GMT16:43 Tesco shares leap 15% to close at 209.25p After a strong day’s trading, shares in Tesco have closed at 209.25p, a jump of almost 15%. It is confirmation that Dave Lewis’s plan to cut prices, close stores, shut the Cheshunt HQ, rein in capital expenditure and abolish the dividend has been well received by the City. But Marks & Spencer finished the day pinned to the bottom of the FTSE 100 fallers; down 3.5% after another disappointing Christmas. Alastair McCaig, market analyst at IG, says Lewis has done a good job calming market fears, which had hammered Tesco’s share in recent months. Tesco’s share price jump is maybe as much a reflection of how aggressively its shares have been treated over the last six months as it is of the optimism that today’s figures have generated. In contrast, the selloff by over 4% in Marks & Spencer’s shares, following disappointing figures linked to delays to online deliveries in December, highlights how serious retail firms must be in meeting their online sales commitments. Updated at 4.50pm GMT 4.36pm GMT16:36 European stock markets surge Europe’s stock markets have posted a strong rally, as traders rediscover their appetite for risk. The FTSEurofirst 300, made up of the largest companies in the region, has provisionally close 2.9% higher at 1,368. The Italian and Frech markets showed the biggest gains, up around 3.7%. In London, the FTSE 100 surged by 150 points to 6569, up 2.34%. Wall Street is in upbeat mood too.... ALERT: Dow rallies 300 points after turning positive for the year earlier » http://t.co/giw2JM8cUc 4.07pm GMT16:07 Those hoardings in Dartford were only put up before Christmas by Tesco after pressure from the council, because the site looked so bad, Sean explains.... 3.59pm GMT15:59 My colleague Sean Farrell has hared down to Dartford. He’s just sent two photos showing the redevelopment work underway in the town. That work only started after Tesco won an 11-year battle to get its new store approved..... Updated at 4.01pm GMT 3.41pm GMT15:41 For many years, Tesco has been lambasted for relentlessly opening stores across the UK, so there’s an irony that it’s now been criticised for ending this trend. But in many cases, local communities have endured years of uncertainty and legal battles over new stores. In Dartford, for example, independent shops were demolished to create space for a new store that now won’t be built. All that’s left now is a wasteland (Kent Online has photos), and local anger. Labour and Ukip parliamentary candidates speak out as Tesco scraps plans to build in Dartford. http://t.co/fuCmz27ue1 pic.twitter.com/yeiGazzMyO 3.39pm GMT15:39 Tesco’s store closures and cancellations are part of a broader trend in the UK, says Chris Keen, director at property group CBRE. He explains: The way we shop is changing, so supermarkets are shifting to smaller stores to keep up with this. The emergence of discounters such as Aldi and Lidl has also put pressure on the market, causing retailers to divert funding that may previously have been used for store construction and development, towards an industry-wide price war. “We expect that this is likely to continue for the foreseeable future as the amount of planned grocery space has declined by -4% since its 2012 peak, and new grocery space under construction has fallen by 20% since end 2013. However, the rate of convenience store opening shows no sign of declining.” 3.10pm GMT15:10 Liberal Democrat MP Danny Alexander has criticised Tesco’s decision not to build a new store in his highland constituency: Tesco decision to abandon new Aviemore supermarket is a huge let down for the local community, bigger store and jobs were much needed 3.09pm GMT15:09 Cheaper cornflakes may help Tesco end its sales slide, but it probably won’t prevent the company’s credit rating being cut. The cost of insuring Tesco’s corporate bonds against default has risen significantly over recent months, to levels which suggest a downgrade is likely, to non-investment (or junk) grade. Tesco CDS now trading at 220bps, over 100bps wider than where they were less than 3 months ago. Now firmly in implied BB territory Updated at 3.35pm GMT 3.00pm GMT15:00 Tesco can’t be accused of underplaying the price cuts announced this morning: Brookfield looking good pic.twitter.com/klrn6qywAI 2.49pm GMT14:49 Tesco’s shares are leading the London stock market today, up an impressive 12% at 205p. But they’re still around a third lower than a year ago, before a string of profit warnings and an admission that earnings had been overstated by senior executives. Updated at 2.54pm GMT 2.41pm GMT14:41 Unions warn Tesco over job cuts The Unite union is demanding a meeting with Tesco to discuss the impact of today’s plan on its workforce. Adrian Jones, Unite national officer, says Tesco staff don’t deserve to suffer for the mistake made by top management over the years: “Our members who deliver day in day out for Tesco, many of whom have done so for a great number of years, are now extremely concerned about their futures. “We all know that Tesco’s mantle has wobbled recently but it is deplorable that management are now making the workers pay for failure at the top. This is on the same day that it announces the appointment of another CEO whose remuneration package will be staggeringly high compared with our members. Not that Tesco’s new CEO needs the money, having banked millions of pounds through his success with Pets at Home. Jones, whose union represents drivers and warehouse operatives, concludes: “Unite is extremely concerned over Tesco’s conduct and the job security of over 2,000 members, and is seeking an urgent meeting with management to discuss their future.” 2.09pm GMT14:09 Locals in Cheshunt are very disappointed by Tesco’s decision to shut its headquarters, ending a 40-year association with the area. Cheshunt ward councillor Mike Iszatt said (via the Hertfordshire Mercury): “I can’t believe it, I am gobsmacked. “I don’t know why they want to move - it’s so convenient for their employees next to the station and we have got Crossrail coming in the near future. “There is so much going on in there, it seems an efficient and happy atmosphere with a buzz about it.” Ooh, @Tesco to close #Cheshunt HQ in a few years. Only decent employment opp in or around the town. Shame 2.03pm GMT14:03 Back to Tesco. Sky’s Guy Harding is doing a fantastic job tracking down the 49 Tesco stores that have been cancelled by CEO Dave Lewis. He’s currently at 32.... So.... my count is now at 32! @Tesco store opening plans scrapped. 32 down, 17 to discover #tesco pic.twitter.com/kQOuRCKPRz 2.02pm GMT14:02 Over to the US briefly. The weekly unemployment data show that just 294,000 Americans filed new claims for unemployment benefit last week, down from 298,000 the previous week. Another sign that the US economy continues to improve. 1.42pm GMT13:42 Names of the 49 Tesco projects that are being cancelled continue to emerge. Scottish television station STV reports that eight are in Scotland: Plans for seven new stores in Aviemore, Banff, Crieff, Cowdenbeath, East Kilbride, Glasgow and Fort William have been scrapped, along with an extension to Tesco’s Cupar branch. Updated at 1.42pm GMT 1.28pm GMT13:28 Reader Lawrence Weetman has kindly reminded me that Tesco even relocated a river during the construction of its store in Chatteris, Cambridgeshire. @graemewearden Not only has the Chatteris store already been built, but they MOVED A RIVER to build it... :-/ The site, mothballed last autumn and officially abandoned today, is a symbol of Tesco’s struggle to adapt to the new retail environment, as large weekly shops at an out-of-town hypermarket have fallen out of fashion. Back in October, we wrote about how the new store was being mothballed - even as workmen put the finishing touches to the site. But, for the time being, the spanking new supermarket will remain a ghost store with dust, rather than trollies, rolling across the newly laid car park where hundreds of parking bays have been drawn out in anticipation. Vast ghost store on the road to nowhere symbolises problems haunting Tesco 1.16pm GMT13:16 The axing of Tesco’s final dividend is a “hammer blow” to investors, says Justin Cooper, Chief Executive of Shareholder Solutions at Capita Asset Services. Last year, the payout was worth almost a billion pounds, as Cooper explains: Tesco was the 19th largest dividend payer in 2014, paying out £1.02bn in total. Its final dividend totalled more than £900m alone last year, and its removal leaves a gaping hole in the pockets of the queues of investors looking for income. With profits under intense pressure, dividends were an obvious target to reduce outgoings, but it’s not often we see such a dramatic move by a heavyweight in the market.” 12.45pm GMT12:45 Tesco hasn’t lost any time in promoting its price cuts to shoppers: Tesco's new price message ringing loud and clear. pic.twitter.com/tfHJzMWB0O 12.35pm GMT12:35 Dave Lewis is defending the decision to axe this year’s final dividend: TEsco Lewis "dividend cut is all about protecting the company" It’s still a blow to investors, though, from big pension groups to small shareholders who may have been relying on a payout from Tesco. 12.27pm GMT12:27 Matt Davies, Tesco’s new UK boss, is one of the retail industry’s rising stars, writes my colleague Julia Kollewe: He joined Halfords from Pets at Home, which was then a private company, transforming it into a national force in pets retailing, with in-store vets and grooming parlours. A biking enthusiast who rides Boardman bikes, Davies kicked off a turnaround plan at Halfords which had issued nine profit warnings in the two years before his arrival. His appointment to the crucial role as head of Tesco UK & Ireland came as a surprise on Thursday but was well received in the City. Mike Dennis, retail analyst at Cantor Fitzgerald, said: “He has done a very good job at rebuilding the Halfords brand and adding more premium products to their offer.” But Tesco will be a big step up: Davies, 43, is also credited for making Pets at Home one of the big retail success stories of recent times. During the eight years he was at the helm – he became CEO in 2004 aged 33 – the chain more than doubled in size to 300-plus stores to become Britain’s biggest pet retailer and was sold to KKR for £955m in 2010 in one of the biggest private equity retail deals. Davies has his work cut out at the supermarket chain, which is in the throes of its worst crisis in its history. Halfords and Pets at Home are minnows compared to Tesco. Britain’s biggest retailer, whose shares jumped by almost 10% on Thursday morning, has a market value of around £16bn, compared with £923m for Halfords and £1bn for Pets at Home, down from its £1.2bn stock market debut last March. Matt Davies: the dog-loving people person charged with mastering a giant http://t.co/pFnITC6NbH 12.14pm GMT12:14 The Chatteris Tesco has actually already been built, but was mothballed last year instead of being opened. 12.10pm GMT12:10 Cambridgeshire has also been told that Tesco will not be opening new stores in Chatteris and Whittlesey. Fenland Council leader John Clark isn’t happy. He told the Cambridge Times that: “We are extremely disappointed by this news. I am seeking an urgent meeting with Tesco to find out precisely what their intentions are.” BREAKING NEWS: Tesco confirm they are to pull out of Chatteris for good and no longer want a s... http://t.co/5BC7JDAYBY #Cambridgeshire Updated at 12.15pm GMT 12.04pm GMT12:04 Analysts are tweeting from Tesco’s conference call: Tesco analyst presentation: highlight for me so far a real focus on getting more staff in-store 12.00pm GMT12:00 The Bank of England has left UK interest rates unchanged at 0.5%, and made no change to its quantitative easing programme. 11.55am GMT11:55 Residents in Amble, Northumberland, won’t be shopping at a new Tesco either. Tesco pulls out of new Amble store. http://t.co/IsQkldGvWk pic.twitter.com/g8aYtP9ELe 11.53am GMT11:53 Tesco has also ditched plans for a store in Newport Pagnell -- much to the delight of protestors, I suspect: .@Tesco shelves plans to build new store in Tickford Street, Newport Pagnell. Read more: http://t.co/M9mHiurqSM pic.twitter.com/uhaWYbCXZR Updated at 11.53am GMT 11.50am GMT11:50 No new Tesco for Colchester: #Standard: Plans to build new Tesco store in Butt Road, Colchester, cancelled http://t.co/1rIxng47Dp #Essex pic.twitter.com/tdx7OTeO8Q 11.50am GMT11:50 Tesco is also ditching plans for its Huddersfield store: Wouldn't it be great to have an arts centre in its place: 'Tesco axe plan for new Huddersfield store' @Examiner http://t.co/GIM5ThbhJE 11.47am GMT11:47 Tesco won’t be building a new story in Immingham, near Grimsby. The local newspaper, the Grimsby Telegraph, calls it “devastating news for the town and surrounding villages”. 11.36am GMT11:36 Tesco’s shares are now up 9.9% at 200p, as investors continues to welcome Dave Lewis’s turnaround plans - and the Christmas trading figures. However, the price of Tesco’s corporate bonds has fallen. That suggests a greater risk that the supermarket’s credit rating will be cut, perhaps imminently. There’s some disappointment that Dave Lewis didn’t announce a cash call to shore up its balance sheet, or any major asset sales (£5m for Blinkbox won’t go very far). Reuters reports: Moody’s has its rating under review for a downgrade, and several investors said they felt today’s announcement was not enough to appease the rating agency. “There is a rumour circulating that they will be downgraded following the investor call, as they haven’t sold their foreign businesses,” said one high-yield bond investor. That conference call with investors has just started.... 11.34am GMT11:34 Here’s my colleague Mark Sweney’s take on the Blinkbox sale: TalkTalk confirms £5m purchase of Blinkbox from Tesco 11.20am GMT11:20 Bexleyheath has also lost its new Tesco. #Bexley: Tesco pulls out of plans to develop in Bexleyheath http://t.co/iYdOQNFAGz #London pic.twitter.com/trGhMXaq4K 11.16am GMT11:16 Summary: Dramatic changes at Tesco A quick reminder of the main developments at Tesco, from my colleague Zoe Wood: The new boss of Tesco has announced a dramatic overhaul of the troubled supermarket chain that will involve the closure of its longstanding head office, thousands of job cuts and the closure or abandonment of nearly 100 stores. Dave Lewis, who joined from Unilever in September, lived up to the nickname “drastic Dave” earned at the consumer goods giant by announcing a raft of major changes, including the poaching of well-regarded Halfords boss Matt Davies to lead the turnaround. Lewis declined to put a figure on potential job losses but admitted: “This is a significant restructuring of a significant-sized business.” Here’s Zoe’s full story: Tesco chief unveils dramatic shake-up at troubled supermarket And here’s a summary of the key points: 10.36am GMT10:36 Dartford residents left fuming as Tesco pulls out There is anger in Dartford, Kent, as community leaders and locals discover that Tesco has abandoned plans to build a new store in their area. Tesco had fought a decade-long battle to win permission for an 8,000sq m store and 34 one-bed and 73 two-bed flats. Now, though, CEO Dave Lewis has decided that the store is one of the 49 to be abandoned, as part of his cutback plan. Local MP Gareth Johnson accused Tesco of treating the town extremely badly. I’ve taken the quotes from KentOnline: “It’s been a very frustrating episode for Dartford, especially when you see how little Tesco has actually done over the years (since announcing its plans). “It brings to an end a sorry tale for the town. But at least the one positive is that there is finally some closure and we can look to the future of Lowfield Street and what we want for that area. Dartford will not be sorry to see the back of Tesco.” Huge news for Dartford this morning as Tesco scrap Lowfield Street scheme. More to follow. http://t.co/fuCmz27ue1 pic.twitter.com/gRQkkfnQXH Local residents are expressing their unhappiness on social media: Re RT, Dartford town centre has been left to rot for a decade waiting for Tesco to pull its finger out. Hopefully now it can be revived... Good work @Tesco 10 years of slowly destroying #Dartford & now you pull out. #LowfieldStreet derelict for yrs and now nothing. #HappyToHelp So a massive well done to Tesco for contributing to the demise of #dartford history, retail & aesthetics! Absolute bellends Updated at 10.48am GMT 10.12am GMT10:12 Details of the 49 future Tesco stores that are being cancelled are starting to leak out. The BBC reports that Tesco has dropped plans to build two in the Highlands of Scotland. Tesco confirms new stores at Fort William and Aviemore will not be built Updated at 10.12am GMT 9.52am GMT09:52 Readers may soon be popping into their local Tesco for a pint rather than a jar of Branston Pickle. Sussex brewery Dark Star reckons some of the 43 unprofitable stores being axed could have a new future as a public house. Email sent to Tesco to ask them which stores they are closing - might look to turn some of them into pubs #whatcomesaroundgoesaround 9.42am GMT09:42 Tesco staff face an uncertain future until the company announces which 43 stores are closing. ITV News flags up that full details probably won’t emerge until April: Employees affected by the closures will be informed over “coming months”. Head office jobs will also see cuts as Tesco cuts overheads by 30%. CEO Dave Lewis said he understood how the announcement would hit “hard-working people”, adding: “I am not immune to the impact of the decisions we have had to take on our colleagues.” Updated at 9.42am GMT 9.28am GMT09:28 Tesco has begun plugging its price cuts in today’s newpapers, with several full-page adverts announcing savings on bread and pickle. The price of around 380 core products will be cut, by roughly 25%. Mike Dennis of Cantor FitzGerald reckons this will help Tesco to “start to close the gap with its major competitors”. 9.18am GMT09:18 Retail analysts and investors are most unimpressed with Marks & Spencer, which suffered a 2.7% drop in underlying sales over Christmas. Another poor performance on clothing and homeware was to blame. It adds up to more questions over CEO Marc Bolland’s future.... Marks & Spencer suffers Christmas sale slump 9.15am GMT09:15 Economist @Domilė B points out that data analytics Dunnhumby, which grew out of Tesco’s Clubcard success is a valuable tool (and could now be sold or floated on the stock market) #dunnhumby could offer important edge over rivals “@FinancialTimes: #Tesco to axe payout and close head office http://t.co/z4ROv1FCxb” 9.00am GMT09:00 Staff at Blinkbox, Tesco’s online movie streaming service, are arriving at work to find they’ve been sold to TalkTalk along with Tesco Broadband..... Looks like I have a new boss http://t.co/xQeFRGU8B9 #talktalk #blinkbox There had been rumours that Blinkbox would fetch £5m. The sale price hasn’t been disclosed, though. Updated at 9.02am GMT 8.52am GMT08:52 Tesco needs to do a better job of getting the basics right, says Danielle Pinnington, managing director of retail consultants Shoppercentric: Shoppers will want to see an improvement in basic shop-keeping - shelf replenishment, queue management, better service and store environments that are easy to shop - before feeling confident Tesco really has changed for the better.” In fact other than same old #price war, still hard to see what will improve the shopping experience @Tesco. Fewer stores, fewer products? 8.50am GMT08:50 Retail analyst Nick Bubb wants to see more details of how Dave Lewis will strengthen Tesco’s balance sheet: The focus of the analysts meeting at 11.30am will be on the actions it is taking on its heavily-indebted balance sheet, but we can’t see anything about the expected big UK property write-downs. Handicapped by its massive over-exposure to the hypermarket business, and with the credit rating agencies breathing down its neck, we wonder whether the eventual verdict of the City on today’s Tesco news will be “too little too late”. 8.47am GMT08:47 Clive Black, analyst at Shore Capital, reckons hiring Matt Davies from Halfords makes sense. Via the FT: Black said the appointment of a UK chief executive “materially frees up Mr Lewis to focus on the mass of group-wide work to be done”, while bringing in an outsider “represents a clean sweep of senior executives; expect more change to come”. 8.39am GMT08:39 The Matt Davies Effect: Tesco up 5.2%; Halfords down 6.7% 8.30am GMT08:30 Fiona Cincotta, a senior market analyst at www.finspreads.com, reckons Dave Lewis is having an impact since being parachuted into troubled Tesco last summer: Tesco has this morning bitten the bullet and taken the plunge in a big push to turn around its fortunes in the face of declining market share and persistent sales slippage. The measures announced last year are “already turning the tide because whilst it still reported declining sales, the rate of their fall has slowed,” Cincotta adds. As the chart at 7.18am shows, comparable sales (ignoring new stores) dropped by 0.3% over Christmas, better than feared. 8.27am GMT08:27 More reaction: Tesco said last year company culture was a problem. Hiring Matt Davies and leaving Cheshunt are two big flags of extent of culture shift. Tesco - group CEO from Unilever. UK CEO from Halfords. Neither has run a grocer before (which may be a good thing). 8.23am GMT08:23 By closing or cancelling more than 90 stores, Tesco’s long period of expansion across the UK is being reversed. Bernard Ginns, business editor of the Yorkshire Post, suggests small shops should benefit: Tesco's store closures shows that capacity exit is the way forward for big food retailers, which should ultimately benefit independents 8.19am GMT08:19 Cancelling 49 new Tesco stores will mean thousands of new jobs won’t be created, Sky News analyst Guy Harding flags up: 49 large stores Tesco's pipeline have been scrapped, assuming an average of 35k sq ft per store - that's c.13k jobs which won't be created 8.16am GMT08:16 Halfords shares have slid by 5% following the surprise news that CEO Matt Davies has got on his bike and headed to Tesco. 8.10am GMT08:10 Last question: Why is Tesco abandoning its Cheshunt HQ after so many decades? It’s a commercially savvy decision to merge our operations at Cheshunt and Welwyn Garden City, and that can only happen at the latter site, says Dave Lewis. Yes, there was some soul-searching. And won’t canning the final salary pension scheme hurt morale on the shop floor? It’s a fair question, Lewis concedes, but I’ve seen that the workforce is very engaged about the challenge we face. And that’s that - he’s off to speak to staff now. 8.06am GMT08:06 Tesco’s final salary pension scheme is being axed Tesco final salary pension scheme to close - one of the last in FTSE100 but in deficit to tune of £3.4 billion. Updated at 8.06am GMT 8.04am GMT08:04 Many of the 43 stores being axed will be Tesco’s smaller outlets. Tesco say significant proportion of closures will be express - means job losses lower. Seems odd closing convenience. 8.03am GMT08:03 Tesco shares jump 5.5% Shares in Tesco have jumped by 5.5% at the start of trading in London to 191p, as investors give their initial response to today’s news. But shares in M&S are down 3% after it reported disappointing results this morning. Updated at 8.03am GMT 8.00am GMT08:00 49 future Tesco projects canned Can we have more details on the 49 Tesco projects that are being cancelled? Most of the projects we won’t go ahead with are very large stores, Lewis replies. 7.58am GMT07:58 How many employees are still suspended while the investigation into Tesco’s profit misstatements are conducted? Three. Isn’t that one fewer than last time? Oh sorry, it’s four -- but one of the execs has a health problem so the suspension is on hold, Lewis explains. 7.56am GMT07:56 Does Lewis’s plan for a 30% cut in overhead costs equate to 30% job cuts at headquarters? No. 7.56am GMT07:56 Where did it all go wrong at Tesco? I’m not a company historian, Lewis snaps back. I’m here to make changes and turn Tesco around -- and the reaction from customers has been encouraging. But surely investors want to know how a company could have lined up 49 future projects that are no longer appropriate? Investors want to know what I”m doing in the future, Lewis insists. There are some things that we’d planned to do which are no longer viable. 7.53am GMT07:53 Goldman Sachs has been hired to assess the future for Tesco’s customer data division dunnhumby. All options are on the table - including an IPO or a sale. Dunhumby options - full sale, Tesco keeps equity or flotation 7.51am GMT07:51 Not sure what to make of the lack of number associated to #tesco job cuts. Does he know the number yet? $TSCO #DaveLewis 7.50am GMT07:50 Can we assume hundreds, if not thousands, of jobs are going at Tesco? It’s a significant restructuring of a significant sized business, Dave Lewis replies. We’ll have more details by April But when will staff learn if they’re losing their jobs? Depends on their level in the organisation. Senior managers will learn their situation first, in January and February, but consulting with junior staff will take longer. Many will find out in April, with an implementation time in May. So, months of uncertainty for Tesco staff, I fear. 7.47am GMT07:47 Which stores are closing? Lewis: We won’t say, for reasons that are obvious. We’ll be consulting with colleagues affected. Tesco will speaking to senior managers in January and February. But the process is going to take until May. 7.45am GMT07:45 Is Tesco making big reductions to the amount of products it offers?? We’ll remain a “full-offering supermarket retailer”, Lewis replies, moving to 70,000 SKUs from 90,000 SKUs (that’s stock keeping units). (by comparison, Aldi and Lidl offer much fewer different products) 7.42am GMT07:42 Is Tesco planning to sell any of its overseas operations? Lewis: We are committed to overseas assets until we decide otherwise. Our balance sheet and liquidity is strong...but today’s announcement isn’t the end of the story. 7.41am GMT07:41 Tesco Q&A Onto questions. How many jobs are being cut? Dave Lewis says Tesco wants to cut its overhead costs by 30%, but he won’t reveal how that translates into headcount cuts. 7.40am GMT07:40 The price cuts announced today are just the start, Lewis says, towards offering stable, lower prices to customers. 7.37am GMT07:37 Lewis confirms that 43 Tesco stores are to close. He also says that Tesco will be writing to another 49 community leaders, to explain that the company is to “pull out of plans for future store developments”. Tough decisions, but vital to improve Tesco’s financial performance. Updated at 7.39am GMT 7.36am GMT07:36 Lewis says that Matt Davies, Tesco’s new UK boss, has “huge intelligence and integrity”. He’ll announce further changes to Tesco’s management team later today. 7.35am GMT07:35 Tesco conference call begins CEO Dave Lewis is holding a conference call with reporters now. I’m dialled in. Lewis says Tesco is staring to deliver a better overall performance, but there’s much more to do. Its’ very early days, but I’m encouraged by the progress so far. We’ll continue to listen to customers. It felt that we brought “every little helps” to life again over Christmas, he says, paying tribute to Tesco’s store staff (he’s hired thousands since taking control of Tesco in the summer). 7.33am GMT07:33 Tesco: instant reaction Tesco poaches Halfords boss Matt Davies to be its new UK chief executive. Beginning to fill the gaps left by suspended execs. The major problem i have with #Tesco's aggresive join of price wars is the race to the bottom. Inflation not rising. When will it end? As announced in last 24 hrs. Tesco joins price war mroe aggresively with lower prices on big brands. #Tesco Christmas sales becoming something of a sideshow after CEO Lewis opts for shock, awe after, all with radical cost cuts # markettalk 7.31am GMT07:31 Tesco is selling its Blinkbox video rental operation to TalkTalk, along with its broadband service, as it focuses on its core operations. It has also appointed advisors to explore strategic options for dunnhumby, its customer data analysis operations. Updated at 2.36pm GMT 7.28am GMT07:28 Tesco won’t pay a final dividend for the 2014/15 year. That’s bad, but not unexpected, news for shareholders. 7.28am GMT07:28 There’s no repeat of the shock profit warnings we saw in 2014: Tesco is sticking to its forecast of a group trading profit guidance of “no more than £1.4bn for 2014/15”. The immediate priority for proceeds from the new level of financial discipline and cost control will be reinvestment in our core customer proposition. 7.27am GMT07:27 On the financial side, Tesco’s immediate priorities include “a significant cost-efficiency programme”, and cutting its capital expenditure bill to £1bn in 2015/1. 7.24am GMT07:24 Tesco confirms it plans to set lower prices on “some of the nation’s favourite brands” 7.22am GMT07:22 Tesco to shut 43 stores, and its Cheshunt HQ Wow. CEO Dave Lewis really is getting to grips with Tesco. The company is shutting 43 “unprofitable stores”, and will also “consolidate head office locations”. closing Cheshunt in 2016 and making Welwyn Garden City the UK and Group centre. Quitting Cheshunt really is the end of an era for Tesco; it dates back to founder Jack Cohen’s days. Closing Cheshunt...I thought Dave Lewis found looking at Jack Cohen's original Tesco warehouse inspiring. 7.18am GMT07:18 Christmas sales decline Tesco suffered another fall in sales over the crucial Christmas trading period, but the downturn did slow. Like-for-like sales dropped by 2.9% over the last 19 weeks, and were down by 0.3% over the six-weeks around Christmas. That’s better than the 5.4% fall in the previous quarter, but underlines how Tesco has been hit by the rise of discount chains like Lidl and Aldi. 7.17am GMT07:17 Tesco poaches Halfords CEO Here we go..... and Tesco has announced that it has hired the boss of retail chain Halfords, Matt Davies, to run its UK and Ireland operations. That’s a huge task, given the deterioration in Tesco’s performance in recent years. George MacDonald, executive editor of Retail Week, reckons it’s a good move: Wow. Matt Davies of Halfords an unexpected choice as Tesco UK CEO. Inspired one though. Great with people, 7.15am GMT07:15 The Agenda: Tesco turnaround plan Good morning, and welcome to our rolling coverage of the financial markets, the world economy, business and the eurozone. Tesco is announcing its turnaround plans today, and revealing how it fared over Christmas. Britain’s biggest supermarket chain will announce a flurry of price cuts, slashing the cost of hundreds of brands including Hovis, Coca-Cola, Marmite and Tetley CEO Dave Lewis is also expected to announce some asset sales, and slash costs at headquarters – potentially cutting hundreds of staff. Here’s what we know so far: Tesco escalates the supermarket price wars by cutting prices Another big-name retailer, Marks & Spencer, is also releasing its Christmas trading figures this morning... Also coming up today...... Stock markets are expected to rally, on speculation that the European Central Bank will announce a QE stimulus programme soon. The Bank of England is setting interest rates at noon - expect no change. Halifax is issuing its latest house price index at 8am. And we get the latest eurozone retail sales and business confidence surveys at 10am. |