Tesco is shutting its head office as well as 43 unprofitable stores as part of a raft of new measures as new boss Dave Lewis battles to turn around the group’s fortunes.
Britain’s biggest supermarket made the announcement as it revealed like-for-like sales for the 19 weeks to January 3 fell by 2.9%, though they were not as bad over the six-week period, with a fall of 0.3%.
Tesco also said it was to close its final salary pension scheme and shut its main headquarters in Cheshunt, Hertfordshire, in 2016, moving to Welwyn Garden City. A restructuring of central overheads is expected to save £250 million a year.
In addition to the shutting of shops, the group announced a “significant revision” to its store-building programme.
It is also selling Tesco Broadband and UK download business Blinkbox to TalkTalk and exploring options for the disposal of its dunhumby data business, as well as cancelling a final-year dividend for 2014/15.
The raft of announcements came as the supermarket also fired the latest salvo in a New Year price war, by cutting the cost of some of its best-known products.
Chief executive Dave Lewis said: “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.”
Pauline Foulkes and Joanne McGowan, national officers of the Usdaw union, said: “We note the difficulties faced by Tesco and we are just as keen to ensure that the company is able to turn the business around and improve its performance.
“We recognise that some change is inevitable, given the challenges faced by the business but we will want to ensure a fair and balanced approach is taken.
“On that basis, we have arranged meetings with the company to understand the rationale behind these proposals and begin discussions at the earliest opportunity.
“We recognise that this is a worrying and difficult time for our members and reps, who will have lots of questions.
“However, the announcement has only just been made and as we go through the consultation process in the coming days and weeks, the situation will become clearer and we will be better placed to answer their questions.
“We want to reassure our Tesco members that Usdaw is committed to supporting and protecting them throughout this process and will continue to communicate and update them as discussions progress.”
Shares rose 5%.
Tesco is not yet disclosing the locations of the 43 stores to close but Mr Lewis revealed that a “significant proportion” would be Tesco Express convenience shops.
The sites will be spread across the country. The chief executive would not give any guidance on the scale of the jobs to be lost or whether they were likely to be in the thousands. Head office jobs will also see cuts as overheads are slashed by 30%.
Employees will start to learn over coming months where the axe will fall as Tesco begins consultations with those affected with full details set to be known by April.
Stores are being shut where Tesco feels it cannot reverse losses.
Mr Lewis also revealed that he was writing to 49 communities to reveal that “with a heavy heart” it was pulling out of new store-building programmes.
Capital spending for 2015/16 will be slashed by £1 billion.
The chief executive, who took over in September confronted by sliding sales and has also had to face up to a £263 million accounting scandal at the group, said the decisions he was taking on Tesco were “never easy”.
He said: “It is a great business that’s come under intense financial pressure and we are trying to reinvigorate the model and address financial challenges.”
Mr Lewis said he understood how the announcement would hit “hard-working people”, adding: “I am not immune to the impact of the decisions we have had to take on our colleagues.”
He said there had been “soul searching” about the decision to close Cheshunt but that it was felt the group did not need two sites on the scale of the centre there and the office it already has in Welwyn.
Mr Lewis was upbeat on Tesco’s trading performance over the festive performance as sales declines eased.
He paid tribute to the “exceptional job” done by staff and added: “It felt like at Christmas we really brought ‘every little helps’ to life again.”
The trading update included a performance for the third quarter to November 22 when like-for-like sales fell 4.2%, plus the subsequent six weeks including Christmas, when they fell 0.3%.
The figures represented an improvement on a fall of 5.4% in the second quarter. Sales fell by 3.7% in the first quarter.
Mr Lewis said: “We are seeing the benefits of listening to our customers. The investments we are making in service, availability and selectively in price are already resulting in a better shopping experience.
“A broad-based improvement has built gradually through the third quarter, leading to a strong Christmas trading performance.”
Meanwhile, Tesco has appointed Halfords boss Matt Davies to head its UK and Ireland business from June 1.
Mr Lewis described him as “an experienced retailer with a proven track record of turning around businesses”.