Tesco has delivered a series of shock announcements this morning (8 January) including a closure of its Cheshunt HQ, a new CEO for its UK business and its Christmas trading results.
Like-for-like sales dropped by 2.9 per cent over the last 19 weeks, and were down by 0.3 per cent over the six-week festive period. This is better than the 5.4 per cent drop in like-for-like sales in the previous quarter.
Europe like-for-like sales were up by 1.0 per cent in the last six weeks, while the business said it has seen fresh food volume growth for the first time in five years.
The company also announced that it will “consolidate head office locations”, closing its historic base in Cheshunt in 2016, and making Welwyn Garden City the UK and group centre.
It is shutting 43 “unprofitable stores”, and plans to simplify store management structures, although it has not yet confirmed how many job losses this will result in.
Elsewhere, the CEO of retail chain Halfords, Matt Davies, has been named as the new head of Tesco’s UK and Ireland operations.
Suppliers are also mentioned in today’s “shock-and-awe” trading statement. Tesco said it plans to rebuild trust in the business by “regenerating relations with suppliers with new commercial income guidelines and associated year-end cash management”.
“There is more to do, but we have taken the first important steps in the right direction,” said CEO Dave Lewis, who was known as Drastic Dave at Unilever for his costcutting zeal.
“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.”
The UK’s largest retailer also looks set to rejoin the ongoing price wars as it said it will lower prices on “some of the nation’s favourite brands”.
It has finally broken the chain of profit warnings and said it will stick to its full-year forecast of a group trading profit guidance of “no more than £1.4 billion for 2014/15”.
Proceeds from the “new level of financial discipline and cost control” will be invested into the company’s core customer proposition, while shareholders will not receive dividends this year.
Lewis added: “I would like to thank all of my colleagues in Tesco. The unique combination of retail expertise and real passion for the customer has been an inspiration to be a part of. In difficult circumstances the team has begun the challenging task of reinvigorating our business.'
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