Tesco set to axe office jobs and sell assets in revamp
Dave Lewis, Tesco's new chief executive, is poised to take an axe to the company's cost base - putting thousands of head office jobs at risk - and set out a plan to sell off assets in an effort to revive what was once Britain's most successful supermarket.
Mr Lewis, who was parachuted in to replace Philip Clarke in July, and revealed a pound260m hole in the company's profits just months later, will set out his strategy for reviving the fortunes of Britain's biggest retailer next week.
Known as "Drastic Dave" for cutting costs at his previous employer Unilever, Mr Lewis is expected to announce hundreds of millions of pounds in savings when he updates investors on Christmas trading on Thursday, according to several people familiar with the situation.
His moves are expected to involve trimming employment at Tesco's head office, and reducing the number of Tesco UK offices from the current level of 23. Mr Lewis said in October that the retailer, which is Britain's biggest private sector employer, had scope to be "streamlined".
Cutting costs would make it easier for Mr Lewis to offer additional discounts at a time when Britain's grocery stores are locked into a bitter price war.
Tesco is also expected to brief investors on plans to strengthen its balance sheet after its investment grade credit rating was put at risk in December by its fourth profit warning in six months. It has brought in Goldman Sachs to advise it on its options.
Mr Lewis is expected to try to extract value from Dunnhumby, the data analysis business that helped create Tesco's Clubcard, which the group now owns. The business could be worth pound1bn-pound2bn, and Tesco could look at a partial or possibly a full sale, according to people familiar with the situation. Several private equity groups, as well as WPP, are said to be interested in the business, although the advertising group declined to comment.
Other options include a sale or float of part of Tesco's Asian businesses. According to bankers, the bulk of the value is in the Thai business, which could be worth pound5bn-pound6.5bn. The Korean business could be worth pound2.5bn, they estimate. Selling off a minority stake in Tesco Bank would also raise funds to shore up Tesco's balance sheet, although bankers say this would be more complicated.
The retailer could announce the sale of Blinkbox. The Financial Times reported last week that TalkTalk was the frontrunner to acquire the video streaming business. Other non-core assets expected to have come under review are Dobbies Garden Centres and the Harris and Hoole coffee shop chain.
Tesco declined to comment on any of its plans. The board will meet next week to finalise the conclusions of the strategic review, and it is possible the discussions could result in changes.
Additional reporting by Arash Massoudi, Jennifer Hughes and Robert Cookson.
(c) The Financial Times Limited 2015