Struggling Tesco begins its comeback strategy
The company has said it will close 43 stores across the UK as well as its headquarters in Cheshunt
8 January 2015
Tesco’s Q3 results revealed like-for-like sales for the 19 weeks to 3 January fell by 2.9%, though they were not as bad over the six-week period, with a fall of 0.3%.
The company announced today that it is putting significant measures in place to improve the fortunes of the company, including the closure of 43 unprofitable stores across the UK, most of which will be local convenience shops, as well as its headquarters in Cheshunt.
Additionally, Tesco is closing its staff pension scheme and selling its entertainment service Blinkbox and Tesco Broadband to TalkTalk.
Following news from rivals Sainsbury’s yesterday that it is to invest £150million in price cuts, Tesco has now promised to cut the cost of over 1,000 of its products.
Shares in Tesco opened up over 5% this morning on news of the overhaul. 2014 was an annus horribilis for the company after an accounting scandal was unearthed and a number of profit warnings were announced.
In Ireland, like-for-like Christmas sales were down 5.5% but there was a like-for-like sales decline of 6.2% in the group’s Irish business for Q3 and chief executive Dave Lewis said that the group’s Europe performance was ‘held back by our performance in Ireland’.
However, a spokesperson said there were no plans for store closures here at the moment.
The chain has made 350 night staff redundant through a voluntary scheme as part of plans to reorganise shelf stacking in some of its Irish outlets.
The company has said that the redundancies followed a plan to “improve customer service” and have more workers on the shop floor during the day.”
At present, Tesco employs around 15,000 people in Ireland. Of the 350 redundancies, 260 will be filled with shelf packing staff in the coming months who will work during the day. Approximately 90 positions will not be replaced.
According to David Gray, Retail Analyst at Planet Retail this morning’s numbers, though offering some respite for Tesco’s embattled CEO, prove that turnaround will be painfully slow.
“The fact is Tesco is still reeling from the effects of the accounting scandal, crucially lacking the manpower to helm its largest vessel, namely the UK. Tesco will need to plug this leadership gap fast if it is to find solutions to faltering sales and lacklustre profits at home.
“Even the overseas empire, once Tesco’s reliable sidekick in a tight spot, continues to struggle. From Europe to Asia there seems no end in sight to stuttering sales. Worse may yet be in store for a retailer seemingly bereft of solutions to its global decline.”