Lewis unveils revival plan as sales fall
43 stores axed as Tesco joins price war
Britain’s biggest grocer is slashing the cost of scores of brands in a move designed to combat the threat of the discounters. Shares in the company leapt on the news as investors welcomed the plan.
On Tuesday, Asda cut the prices of 2,500 “essentials” while Sainsbury’s yesterday announced further reductions as part of a £150m price-cutting strategy announced last year.
Lewis will close Tesco offices, relocate the head office from Cheshunt to Welwyn Garden City, and is selling Blinkbox to TalkTalk in what is expected to be the first of a wave of asset sales. It has appointed advisers to consider options for the analytics business Dunnhumby. It said nothing about the future of Tesco Bank amid speculation that it may float part of the business.
The company said it will consult on a plan to close its final salary pension scheme and will not pay a final dividend. The company says that 49 store developments will no longer go ahead, including those in Aviemore, Banff, Cowdenbeath, Crieff, East Kilbride, Fort William and Glasgow.
The store closures are expected to include a number of Tesco Express convenience stores and involve hundreds of jobs.
The restructuring follows a 2.9% fall in UK like-for-like sales in the last 19 weeks, although this was an improvement on the 5.4% decline in the previous quarter.
Group sales for the 19 weeks to 3 January 2015 declined by 0.6% at constant rates, including fuel and 1% excluding fuel.
It had a better than expected Christmas but Lewis (pictured) needs to make cutbacks after four profits warnings and the discovery of a £263 million overstatement of profits in its accounts. The cuts announced today will save £250m.
In today’s statement, he said: “We have some very difficult changes to make. 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.”