Written by: Keith Tully
Reviewed: Thursday 8th January, 2015
Tesco has announced it will close 43 unprofitable stores around the UK as part of a plan intended to turnaround the retailer’s flagging financial performance.
“We have some very difficult changes to make,” said Tesco’s chief executive Dave Lewis, who also revealed that plans to build 49 new Tesco stores are being shelved as the business looks to focus firmly on profitability and cost cutting.
Details of potential job losses resulting from the planned store closures are yet to be announced but Tesco did make clear that it will soon be closing its staff pension scheme. Overall, the retail giant is aiming to reduce its overheads by around 30 per cent and make cuts worth a total of £250 million.
The past two years have been the most testing in Tesco’s recent history, with sales across its 3,300 UK stores falling and the company being forced to issue a number of profit warnings.
“In difficult circumstances the team has begun the challenging task of reinvigorating our business. There is more to do but we have taken the first important steps in the right direction,” said Dave Lewis in a statement.
“I am very conscious that the consequences of these changes are significant for all stakeholders in our business but we are facing the reality of the situation.”
Despite its recent difficulties, which have included a high profile accounting scandal, Tesco was able to report improved trading performance in its most recently-assessed financial quarter and particularly over the six-week festive period.
According to the latest numbers, sales across Tesco stores in the run up to Christmas were down just 0.3 per cent on the same period of last year, which, in the context of a much more dramatic drops, is being seen as positive progress for the business.
Meanwhile, in the three months to the beginning of January, sales fell by 2.9 per cent as compared with the same period in 2013. However, these figures were also seen as being relatively positive in light of the fact that the three months to the start of October saw a 5.4 per cent year-on-year decline in sales nationwide.
“Our recent performance gives us confidence that when we pull together and put the customer first we can deliver the right results,” said Lewis.
A variety of other notable announcements were made by Tesco in a wide-ranging trading update, including the appointment of Matt Davies, currently chief executive at the Halfords Group, as Tesco’s new UK and Ireland CEO.
It was also revealed that Tesco will consolidate its head office locations in 2016 with its Cheshunt operating centre to be closed and its Welwyn Garden City facility to be established as the primary office base for what remains the UK’s largest retail business.