[ 2014-10-26 ]

Tesco reveals big store woes
TESCO’S new boss has admitted a third of its
hypermarkets are failing, underlining the scale of
the challenge facing Britain’s biggest grocer as
it struggles with plummeting sales.

Dave Lewis told analysts that two-thirds of the
chain’s 250 giant Extra stores were “to die
for”, indicating the rest were underperforming.
Tesco has been battered as families have ditched
the big weekly shop for smaller top-ups at
convenience stores, and switched to discount
rivals such as Aldi, Poundland and Lidl.

Tesco suffered the worst sales fall in the
industry in the 12 weeks to October 12, according
to the research firm Kantar Worldpanel, with a
3.6% slide.

Lewis is expected to hack costs to fund price cuts
in stores. At the interim results on Thursday he
pointed out that Tesco’s 32 offices could be
consolidated, leading analysts to predict that
more than 5,000 jobs could be cut.

Lewis reported a near-halving of trading profits
and updated the City on the corporate scandal that
has rocked the company. He said the overstatement
of profits under the regime of his predecessor,
Philip Clarke, amounted to £263m, but declined to
give details because of an inquiry by the City
watchdog.

Sir Richard Broadbent, the chairman, resigned on
Thursday after weeks of pressure, saying he wanted
to “reflect the principle of accountability”.

The turmoil has prompted a frenzy of activity
among investment banks and private equity firms
keen to bid for assets that may be sold to shore
up the balance sheet.

Clayton, Dubilier & Rice, the buyout house advised
by the former Tesco boss Sir Terry Leahy, is
understood to be in the early stages of
considering an approach for Dunnhumby. The £2bn
data analytics business drove the success of the
Tesco Clubcard.

Separately, Leahy is due to talk to investors
about the retail sector in a conference call
organised by Bank of America Merrill Lynch this
week, and is likely to be quizzed then about
Tesco’s prospects.

Lewis said he would “never say never” to a
rights issue but that any funding moves would stem
from Tesco’s new strategy, yet to be developed
as most of his first two months has been spent
firefighting. Credit rating downgrades by
Moody’s and Standard & Poor’s suggest he could
be pushed into raising cash soon.

Source - The Times(UK)

... go Back