While investors rejoiced, councils and local planning authorities were left reeling yesterday after Tesco announced it would close its Cheshunt HQ, some existing stores and shelve new planing projects amid a raft of changes aimed at cutting costs.
Britain’s biggest supermarket said staff at its north London base would move to its offices in Welwyn Garden City in the first quarter of next year as part of efforts to reduce overhead costs by 30 per cent.
Chief executive Dave Lewis said the group was currently undergoing a consultation and refused to be drawn on how many job losses the move would result in. Around 3,000 staff currently work at Cheshunt.
It is also closing 43 unprofitable stores – of which around half are Tesco Express convenience shops – and shelving plans for a further 49 stores, in a blow to local communities.
Lewis admitted that the decision to close shops and break the tie with its historic home in Cheshunt was “very difficult” and said it was a day of “mixed emotions”.
He said: “I’m acutely aware that the decisions we’ve taken today have wide-reaching implications for just about every stakeholder in our business. We are now having to face financial realities of the business and that has some big consequences for colleagues in our stores and communities.”
He declined to identify the locations of the existing stores to be closed, saying the group needed time to inform its employees.
However, plans for around new eight new developments in Scotland are understood have been abandoned, as have supermarkets in Dartford, in Kent, Mablethorpe and Sleaford in Lincolnshire.
Danny Alexander, the chief secretary to the Treasury has said he is “deeply disappointed” with Tesco’s decision to scrap plans for a larger store in Aviemore, which is part of his Scottish constituency.
Meanwhile, the decision to close stores and axe jobs was met with anger by Unite. The union’s national officer Adrian Jones said: “We all know that Tesco’s mantle has wobbled recently, but it is deplorable that management are now making the workers pay for failure at the top.
“This is on the same day that it announces the appointment of another chief executive whose remuneration package will be staggeringly high compared with our members,” he said, referring to Matt Davies being hired as head of UK & Ireland.
Tesco is the country’s biggest private sector employer with around 314,000 UK staff. The retailer hired more than 6,000 new members of staff in the past three months of the year to work in its stores and improve customer service.
In the first 100 days of running a company, most new chief executives have time to settle down, review the business, and meet employees before making any drastic changes. Not so for Lewis, who has had to act faster than probably any chief executive before him to stop the runaway train that was Tesco from driving off a cliff.
Leadership and management consultant Jeff Grout, who has advised retailers, including Tesco and Amazon in the past, said the speed at which he has addressed various issues at Tesco underlines his success so far at the chain.
“An external candidate in some way can be much bolder because they are not constrained by their history with the organisation and any inherent perceptions. By making bold decisions and taking action quickly, he is showing he is in control,” Grout said.
He added that by hitting investors first with the worst possible news – the profit scandal and a fourth profit warning - Lewis ensured that “any improvements then made are much more marked.”