Tesco finally lets rip, as sales keep falling

<p>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 […]</p>

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.

Like its rival Sainsbury, which reported Christmas sales yesterday, the UK’s largest supermarket chain in terms of annual sales claims already announced measures introduced during its calamitous 2014, are already turning the tide because whilst it still reported declining sales, the rate of their fall has slowed.

Tesco on Thursday said same-store sales, excluding petrol, fell 2.9% in the 19 weeks to January 3, better than most analysts’ predictions and a significant improvement on a decline of 5.4% in the second quarter.

Christmas-specific sales at the retailer—made up of the most recent six weeks—fell 0.3%.


The better-than-expected sales slowdown is being eclipsed somewhat this morning by a raft of measures announced by the supermarket to return revenue growth to the strength seen in years past and stabilise its balance sheet, which notably contains areas which appear to present risks of write downs and total debt that has become potentially crippling compared to its total market value.

  • Savings of around £250m a year expected from restructuring of central overheads, simplification of store management structures and increased working hour flexibility at a one-off cost of £300m pounds.
  • Closure of Cheshunt headquarters planned in 2016, with Welwyn Garden City office to become UK and group headquarters.
  • Capital expenditure budget to be cut to £1bn in 2015/16 from £2.1bn in 2014/15.
  • 43 unprofitable stores to be closed; store building programme to be scaled back.
  • No final dividend for 2014/15.
  • As widely predicted, announced the sale of Tesco Broadband and loss-making video streaming service Blinkbox to TalkTalk, the UK broadband and telephone service provider
  • Dunnhumby, the potentially lucrative consumer data gathering company behind the Clubcard loyalty programme, which may be valued at £1bn-2bn, has also been put on the block.


Please check City Index Market News and Analysis often today, for a continuing stream of new articles and updates, plus check @CityIndex and the Twitter feeds of my colleagues and myself for more.


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