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Will drastic cuts end Tesco’s pain?

Thursday, January 08, 2015 - 02:15

Tesco, the world's third biggest retailer is planning to cut hundreds of millions of pounds of costs and sell assets to fund lower prices. As Ciara Lee reports its in response to the biggest crisis in its 95-year-history.

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It needs a comeback after the biggest crisis in its 95-year-history, but will Tesco's new year's resolutions be enough? The retailer needs to recover from four profit warnings and a costly accounting scandal - not to mention a growing pension deficit and high debt levels. The aim - halve expenditure for next year to 1 billion pounds and cut annual costs by 250 million. The good news was improved trading over the key Christmas period. But CEO Dave Lewis still has a tough job ahead. He's taking on the challenge by cutting prices and scrapping the final 2014 dividend. He's also selling Tesco's broadband and Blinkbox video streaming service. Stephen Springham is from Planet Retail. (SOUNDBITE) (English) STEPHEN SPRINGHAM, SENIOR RETAIL ANALYST, PLANET RETAIL, SAYING: "I think the plans are pretty radical and they need to be. In terms of approach there can be no sacred cows. I think the only sacred cow is the UK grocery business. Everything else is under review." Shares were up 5 percent in early trade as the market welcomed initial moves to turn the business around. CMC Market's Michael Hewson. (SOUNDBITE) (English) CMC MARKETS, MARKET ANALYST, MICHAEL HEWSON, SAYING: "It's a sad fact of life that when a CEO announces a closure programme, shareholders seem to like that because it shows that the CEO is getting serious. But I think it is still too early to call time on the fact that we are getting a bit of a turnaround story in Tesco's." After two decades of uninterrupted growth, Tesco lost its way when it became distracted by overseas expansion. Like other British supermarkets it's also lost sales to German discounters Lidl and Aldi. (SOUNDBITE) (English) STEPHEN SPRINGHAM, SENIOR RETAIL ANALYST, PLANET RETAIL, SAYING: "For all its trials and tribulations, it's still far and away the UK's biggest retailer. The whole sector might not dance to its tune anymore but it's certainly got to sit up and listen. So yes the whole sector, and that includes everybody, even the discounters Aldi and Lidl, who are currently having their moment in the sun they will be keeping an eye on what Tesco does." A new UK boss has also been appointed - and Lewis says this won't be end of the revolution As the company's slogan goes "Every little helps".

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Will drastic cuts end Tesco’s pain?

Thursday, January 08, 2015 - 02:15