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Tesco kicks off turnaround plan with asset sales and store closures

Published:  08 January, 2015

Tesco is taking radical steps to turn around its flagging business, including major cost-cutting, selling off assets, closing 43 stores and its Cheshunt headquarters and scrapping plans for 49 new ventures in a bid to fund lower prices.

Tesco Dave Lewis Lewis, former senior executive at Unilever, is closing the firm's Cheshunt headquarters in 2016, a sign of significant culture change, according to analysts.

Chief executive Dave Lewis confirmed that 43 Tesco stores are to close - many of which are convenience outlets - with plans for another 49 future store developments shelved. Although this will mean major job losses, and thousands of jobs that won't be created, Tesco has not put a number on this yet, and says the process will not be fully finalised until May.

The grocer's recent falling sales slowed down over the all-important Christmas period, with like-for-likes down 2.9% over the last 19 weeks, and 0.3% over the six weeks of Christmas. It represents an improvement on the 5.4% drop in the previous quarter.

The group is selling its Blinkbox video rental operation and its broadband service to TalkTalk.

It has also appointed advisors to explore strategic options for Dunnhumby, its customer data analysis operations, which grew off the back of its Tesco Clubcard success.

The supermarket has also poached well-respected Halfords chief executive Matt Davies to head up its UK business. This has been well-received with shares at Tesco up 5.2% on hearing the news; but down 6.7% at bike retailer Halfords.

The group described the combined "actions are the first steps in strengthening the balance sheet" adding that "further initiatives which maximise shareholder value are under consideration".

Lewis said: "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.

"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."

Fiona Cincotta, senior market analyst at, said: "Tesco has this morning bitten the bullet and taken the plunge in a big push to turn around its fortunes in the face of declining market share and persistent sales slippage."

Retail analyst Nick Bubb fears the measures will be "too little too late". "The focus of the analysts meeting at 11.30am will be on the actions it is taking on its heavily-indebted balance sheet, but we can't see anything about the expected big UK property write-downs.

"Handicapped by its massive over-exposure to the hypermarket business, and with the credit rating agencies breathing down its neck, we wonder whether the eventual verdict of the City on today's Tesco news will be 'too little too late'."

Others are keen to see the retailer focus on getting the basics right. Danielle Pinnington, managing director of retail consultants Shoppercentric, said: "Shoppers will want to see an improvement in basic shop-keeping - shelf replenishment, queue management, better service and store environments that are easy to shop - before feeling confident Tesco really has changed for the better."

Check back on tomorrow to see the results of our exclusive survey of suppliers on retailers in the UK. Find out what they really think.