Tesco is preparing to make deeper than expected job cuts by removing at least 1,000 store management staff as it battles falling sales and profits.
The additional cuts would come on top of an expected 4,000 job losses from the closure of 43 stores and its head office in Cheshunt, Hertfordshire, according to a source with knowledge of the plan.
Britain’s biggest supermarket chain is going through the most radical overhaul in its 96-year history as its chief executive Dave Lewis attempts to turn round the business following a £263m profit misstatement last year.
The changes, first signalled in January, follow thousands of job cuts in the supermarket sector in response to the growing threat of discounters Aldi and Lidl. Last year, Asda cut 1,360 jobs and Wm Morrison 2,600 in similar shake-ups of their store management, while last month J Sainsbury said it would cut 500 jobs at its head office.
Tesco plans to strip out a layer of store management. Affected staff will be offered alternative roles at the company, according to someone familiar with the plans, but it is unclear if those will pay the same wage. The person expected 1,000 staff to leave as a result.
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Consultations with staff began at the end of last month and the precise scale of the job cuts will depend on the number of head office and store staff that take voluntary redundancy or alternative jobs. According to a report in The Sunday Telegraph, total job losses could reach 10,000.
Clive Black, an analyst at Shore Capital, said further cuts on top of what Tesco had previously signalled were to be expected as Mr Lewis simplified the business.
“Labour is the biggest operating cost and if Tesco is serious about being a simplified business then you would expect further job reductions,” he said.
Since taking over in September, Mr Lewis, who earned the name “Drastic Dave” after wielding the axe at Unilever in a previous role, has embarked on a cost-cutting plan that has also included reducing Tesco’s product range and selling non-core businesses.
His efforts may be beginning to bear fruit with the latest Kantar Worldpanel data showing a small sales rise in the 12 weeks to February 1, the first since January 2014.
The supermarket chain is still on the hunt for a new chairman, with ITV’s chairman and former Conservative MP Archie Norman emerging as a contender after Sir Ian Cheshire, former chief executive of DIY retailer Kingfisher, pulled out of the running in January. John Allan, the former chairman of Dixons, is also a potential candidate for the job.
Tesco declined to comment.
Date: February 15, 2015