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| Tesco chief unveils dramatic shake-up at troubled supermarket | |
| (35 minutes later) | |
| 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. | 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. | 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.” | Lewis declined to put a figure on potential job losses but admitted: “This is a significant restructuring of a significant-sized business.” |
| In a sign that significant job cuts are on the cards at the UK’s biggest private sector employer, with 314,000 and has a total worldwide workforce of 500,000, Lewis said he wanted to cut central overheads by 30%. The consultation process is starting on Thursday - affected senior staff will be the first to learn their fate with the reorganisation due for completion by May. | In a sign that significant job cuts are on the cards at the UK’s biggest private sector employer, with 314,000 and has a total worldwide workforce of 500,000, Lewis said he wanted to cut central overheads by 30%. The consultation process is starting on Thursday - affected senior staff will be the first to learn their fate with the reorganisation due for completion by May. |
| As part of the shake-up Tesco will end its long association with Cheshunt in Hertfordshire. “There was some soul searching but we agreed to do it because this is a new chapter for Tesco,” Lewis said. “My job is to think about the future.” | As part of the shake-up Tesco will end its long association with Cheshunt in Hertfordshire. “There was some soul searching but we agreed to do it because this is a new chapter for Tesco,” Lewis said. “My job is to think about the future.” |
| Other than 43 loss-making stores which are to be closed, the lion’s share of the job losses would be roles at head office, Lewis said. “We are restructuring the group in way that does not sacrifice any customer-facing roles,” he said. “These stores are a drain on the finances of the business and a loss we can no longer bear.” | Other than 43 loss-making stores which are to be closed, the lion’s share of the job losses would be roles at head office, Lewis said. “We are restructuring the group in way that does not sacrifice any customer-facing roles,” he said. “These stores are a drain on the finances of the business and a loss we can no longer bear.” |
| Lewis also revealed plans to abandon the construction of 49 new stores which he said the retailer “quite simply could not afford” given its straitened financial circumstances. The retailer is still reeling from the autumn accounting scandal which revealed a £263m hole in expected profits. | Lewis also revealed plans to abandon the construction of 49 new stores which he said the retailer “quite simply could not afford” given its straitened financial circumstances. The retailer is still reeling from the autumn accounting scandal which revealed a £263m hole in expected profits. |
| The stores earmarked for closure are both high street and out-of-town branches. However, the abandoned projects are mainly the large Tesco Extra stores that no longer make financial sense amid changing British shopping habits. | The stores earmarked for closure are both high street and out-of-town branches. However, the abandoned projects are mainly the large Tesco Extra stores that no longer make financial sense amid changing British shopping habits. |
| Lewis’s main measures include: | Lewis’s main measures include: |
| • restructuring head office and streamlining store management to save £250m a year, with a one-off cost of £300m | • restructuring head office and streamlining store management to save £250m a year, with a one-off cost of £300m |
| • consolidation of head office sites, including the closure of its near 40-year-old group base at Cheshunt in 2016 and making Welwyn Garden City the new HQ | • consolidation of head office sites, including the closure of its near 40-year-old group base at Cheshunt in 2016 and making Welwyn Garden City the new HQ |
| • the closure of 43 unprofitable stores | • the closure of 43 unprofitable stores |
| • 49 planned new stores axed | • 49 planned new stores axed |
| • consultation to close the company’s defined-benefit pension scheme, which is £3.4bn in deficit | • consultation to close the company’s defined-benefit pension scheme, which is £3.4bn in deficit |
| • the disposal of Tesco Broadband and Blinkbox to TalkTalk | • the disposal of Tesco Broadband and Blinkbox to TalkTalk |
| • the appointment of advisors to explore strategic options for the Dunnhumby data-mining business | • the appointment of advisors to explore strategic options for the Dunnhumby data-mining business |
| • no final dividend for the current financial year | • no final dividend for the current financial year |
| • and hiring Halfords’ boss Matt Davies as UK & Ireland CEO. He starts on 1 June | • and hiring Halfords’ boss Matt Davies as UK & Ireland CEO. He starts on 1 June |
| As Lewis set out his shake-up, he reported an improving sales trend with like-for-like sales down 2.9% over the last 19 weeks. Within that, like-for-like sales (which strip out new space) were down 0.3% for the key six-week Christmas trading period. The retailer said its UK stores had recorded their first volume growth in fresh food in five years over Christmas. | As Lewis set out his shake-up, he reported an improving sales trend with like-for-like sales down 2.9% over the last 19 weeks. Within that, like-for-like sales (which strip out new space) were down 0.3% for the key six-week Christmas trading period. The retailer said its UK stores had recorded their first volume growth in fresh food in five years over Christmas. |
| “We delivered a marked improvement in our performance across the period,” said Lewis, who said the extra 6,000 staff drafted on to the shopfloor roles were making a difference in customer service. “Over Christmas it felt like we brought “every little helps” to life in store.” | “We delivered a marked improvement in our performance across the period,” said Lewis, who said the extra 6,000 staff drafted on to the shopfloor roles were making a difference in customer service. “Over Christmas it felt like we brought “every little helps” to life in store.” |
| In a bid to improve the competitiveness the retailer launched a wave of price cuts on Thursday involving 380 branded grocery lines, including Hovis bread, Coca-Cola and Tetley teabags, reduced by an average of 25%. Lewis said Tesco’s prices had been “significantly out of line” with rivals on the products in question but declined to put a figure on the investment involved. | In a bid to improve the competitiveness the retailer launched a wave of price cuts on Thursday involving 380 branded grocery lines, including Hovis bread, Coca-Cola and Tetley teabags, reduced by an average of 25%. Lewis said Tesco’s prices had been “significantly out of line” with rivals on the products in question but declined to put a figure on the investment involved. |
| Lewis described bringing in Davies as an “experienced retailer with a proven track record of turning around businesses. “He is a guy of huge intelligence and integrity and will be a valuable addition to the team,” he said. | Lewis described bringing in Davies as an “experienced retailer with a proven track record of turning around businesses. “He is a guy of huge intelligence and integrity and will be a valuable addition to the team,” he said. |
| With some analysts speculating that Tesco would have to sell other assets such as its successful Asian hypermarket chain to further shore up its finances, Lewis left the door open: “We are committed to keeping all our operations overseas until make a decision otherwise.” | With some analysts speculating that Tesco would have to sell other assets such as its successful Asian hypermarket chain to further shore up its finances, Lewis left the door open: “We are committed to keeping all our operations overseas until make a decision otherwise.” |
| The wide-ranging announcement was well-received in the City, sending Tesco shares up 7% to 195p. Jefferies analyst James Grzinic said the recovery plan looked “well structured” with Christmas trading confirming better UK demand over the festive period. “Long-suffering shareholders are spared dilution as the final dividend and capex are cancelled/reduced for a £1bn saving. We do not expect the disposals of Blinkbox/Broadband to have raised much, and today’s news of a potential sale of Dunnhumby could imply between £1bn-£2bn of cash to come through at some point in the coming year. | The wide-ranging announcement was well-received in the City, sending Tesco shares up 7% to 195p. Jefferies analyst James Grzinic said the recovery plan looked “well structured” with Christmas trading confirming better UK demand over the festive period. “Long-suffering shareholders are spared dilution as the final dividend and capex are cancelled/reduced for a £1bn saving. We do not expect the disposals of Blinkbox/Broadband to have raised much, and today’s news of a potential sale of Dunnhumby could imply between £1bn-£2bn of cash to come through at some point in the coming year. |
| “Bottom line, more is likely required to fix the balance sheet but today’s developments mean that Tesco is not a forced seller of international assets.” | “Bottom line, more is likely required to fix the balance sheet but today’s developments mean that Tesco is not a forced seller of international assets.” |