By Peter Evans
LONDON--U.K. supermarket chain Tesco PLC will invest in cutting
prices, close unprofitable stores and begin selling off assets as
the giant retailer seeks to revive its fortunes after a year of
turmoil.
Tesco on Thursday said same-store sales, excluding gasoline,
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 sales at the retailer--made up of the
most recent six weeks--fell 0.3%.
Tesco said it won't pay a final dividend for the current
financial year but maintained its group trading profit guidance of
no more than GBP1.4 billion ($2.11 billion).
"We have some very difficult changes to make," said Chief
Executive Dave Lewis. "Our recent performance gives us confidence
that when we pull together and put the customer first we can
deliver the right results."
While Tesco is still the U.K.'s biggest retailer by sales, it
has faced years of falling market share amid intense competition
from higher-end grocery stores and aggressive discounters.
In a bid to revive Tesco after a period of turmoil unprecedented
in its 96-year history, Mr. Lewis unveiled some drastic
measures.
Measures include a decision to consolidate head office
locations, the sale of its Blinkbox movie streaming service to
TalkTalk PLC for an undisclosed fee and plans to close 43
unprofitable stores.
The retailer also said it would launch a cost-savings program
and reduce capital expenditure to GBP1 billion in the 2015/16
financial year.
The steps come after a turbulent year for Tesco, which has
replaced its chief executive and chief financial officer and issued
four profit warnings. The retailer is the subject of a continuing
investigation by the U.K Serious Fraud Office into a GBP263 million
accounting misstatement, which could result in criminal convictions
for individuals, or the company as a whole.
The accounting issue involves the overstating a profit forecast
and resulted in the departure of several senior executives.
In the wake of the scandal, Tesco Chairman Richard Broadbent
also said late last year he plans to step down when a replacement
has been found.
Write to Peter Evans at peter.evans@wsj.com
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