The chain will close 43 stores and has appointed a new UK CEO
After a disastrous 2014, embattled supermarket chain Tesco’s chief executive Dave Lewis is gung ho about turning around Tesco.
He’s closing 43 stores as part of a drastic cost-cutting plan to save £250m a year (full details below), while appointing a new UK CEO, Matt Davies.
Today the supermarket announced better-than-expected sales figures, with like-for-like sales dropping 2.9% in the 19 weeks to 3 January. This boosted Tesco’s share price rise by 9% today.
However, over the six-week Christmas period, Tesco sales fell by 0.3%.
So let’s start with the good news…
Meet Tesco’s new UK CEO
Matt Davies, Halfords Group’s current CEO, will join as Tesco’s new UK and Ireland boss on June 1.
Dave Lewis hailed Davies as “an experienced retailer with a proven track record of turning around businesses”.
In a statment, Davies said: “My decision to leave has been very difficult. I have really enjoyed my time at Halfords, working with a great team of people across the business, helping to create and deliver a clear service-focused strategy. I am fully committed to driving the business over the next few months before I depart, as we continue to implement the Getting Into Gear Strategy.”
And now for the cuts…
Tesco’s cost-cutting plan
Lewis admitted today that the supermarket has “some very difficult changes to make”.
That’s why he’s vowed to cut costs by £250m this year.
In a statement, he said: “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.
“Our recent performance gives us confidence that when we pull together and put the customer first we can deliver the right results.”
Take a look at the big changes at Tesco announced today:
1. Closure of 43 unprofitable stores
Tesco is planning to shut 43 of its unprofitable stores around the UK. While details of the stores closing will be revealed only over the next few months, rumours suggest that Tesco’s plans to build two new stores at Fort William and Aviemore in the Highlands of Scotland have been cancelled.
Dave Lewis, Tesco’s chief executive officer, said: “It is with a heavy heart that I am today announcing that we are unable to proceed with 49 planned new store developments across the UK, including our planned new stores in Fort William and Aviemore.
“Our performance as a business has fallen significantly short of where we would want it to be and my absolute imperative has to be to protect the future of our business for the 300,000 colleagues we employ in communities all over the UK.”
Lewis acknowledged the closures will affect “hard-working people”.
“I am not immune to the impact of the decisions we have had to take on our colleagues,” he said.
2. Sell its Cheshunt HQ
Tesco has also decided to sell off its HQ in Cheshunt in Hertfordshire. Staff will move to a new HQ at Welwyn Garden City, also in Hertfordshire, in 2016.
3. Blinkbox sold to TalkTalk
Tesco’s online streaming service Blinkbox and Teso Broadband is being sold to TalkTalk. While figures of the deal haven’t been disclosed, TalkTalk is rumoured to have paid £5m in cash for Blinkbox.
Dido Harding, chief executive of TalkTalk, said, “The purchase of Tesco’s broadband base is another example of TalkTalk leveraging its national network to grow faster. We are excited about the future of quad-play – fixed phone and broadband, TV and mobile – and this acquisition will help to further drive home our value for money advantage.”
4. Dunnhumby may be sold
Tesco is also reviewing options to sell Dunnhumby, the data analytics firm that came up with the Tesco Clubcard scheme. Goldman Sachs has been appointed to find suitable buyers.
Rumour has it that WPP may put in a bid for the firm.