Tesco’s day of reckoning
Stores to be scrapped as Lewis unveils new strategy
FOR years campaigners protested against ‘Tesco Towns’ popping up all over the UK – but there are now suddenly going to be fewer of them. The troubled supermarket giant yesterday said it will close 43 unprofitable stores, many of them local convenience shops.
New chief executive Dave Lewis also shelved plans to open 49 large stores as he lived up to his nickname ‘Drastic Dave’.
The news was welcomed in some quarters amid fears that Tesco and other big grocers threaten to destroy local communities.
North Wiltshire MP James Gray is delighted plans for a superstore in Royal Wootton Bassett were scrapped.
‘The focus of the town must be the High Street,’ he said, ‘and an out-of-town Tesco would potentially have ruined that.’
But it was greeted with horror elsewhere amid fears over the loss of jobs and investment in areas crying out for regeneration.
Many of the proposed store openings included the development of houses, shops, offices and other facilities and were at the heart of crucial regeneration projects.
Alarmed Government minister Danny Alexander, chief secretary to the Treasury, tweeted: ‘ Tesco decision to abandon new Aviemore supermarket is a huge let-down for the local community. Bigger store and jobs were much needed.’
Roger Lawrence, leader of Wolverhampton City Council, said he was ‘ extremely disappointed and angered’ that the redevelopment of the former Royal Wolverhampton Hospital will not go ahead.
And Tesco’s dropping of plans to redevelop a neglected street in Dartford, after fighting for 11 years for permission, was branded ‘appalling’ by the town’s MP.
‘This ends a very frustrating and lamentable period for Dartford,’ said Gareth Johnson. ‘I will be glad to see the back of Tesco.’
Lewis said the decision to swing the axe – and the proposed move from its Cheshunt HQ to Welwyn Garden City – was part of an ‘end-to-end property review’ at the company with the results due in April.
‘We are looking at the property portfolio of the whole group,’ he said. ‘ We are looking at all our assets and looking at where we might be able to release value. We are having conversations with developers and councils now. Some of these sites included homes and this is being discussed.’
The sheer scale of Tesco’s property empire, built up in the 1990s and 2000s, means the outcome of the review will have consequences far beyond the company itself.
With more than 3,300 stores across the UK as well as an estimated £10bn worth of land, Tesco is Britain’s biggest property company as well as its biggest grocer.
Critics say it is has 300 undeveloped sites in Britain that could be used to build 15,000 homes.
Tesco has already branched out and last year unveiled plans to build 4,000 homes on land once earmarked for stores.
It has not always proved successful, however. A superstore in Woolwich, London, with flats above was recently awarded the Carbuncle Cup, an architectural award for the worst building in Britain.
Now, under Lewis, Tesco is scaling down its ambitions. Property experts at CBRE said planned UK grocery space has already declined by about 4pc since 2012. CBRE director Chris Keen said: ‘The way we shop is changing, so supermarkets are shifting to smaller stores to keep up. The emergence of discounters such as Aldi and Lidl has put pressure on the market, causing retailers to divert funding that may previously have been used for store construction and development, towards an industry-wide price war.’
Tesco yesterday refused to say which 43 stores will close but analysts at HSBC estimated that they represented just 1pc of sales.
Tim Vallance, head of retail and leisure at property consultants JLL, said the closures were ‘no bad thing’ in terms of property values but the impact on local economies would be ‘huge’, as jobs are lost.
Thousands of jobs will also be under threat from Tesco’s decision to abandon 49 new projects. Much of the regeneration in the UK since the financial crisis has been underpinned by a new supermarket. ‘A lot of these developments will become unviable,’ said Vallance.
Experts warned that this is likely to be only the beginning of the overhaul at Tesco’s property portfolio. ‘The big issue for Tesco is the reliance on superstores,’ said Planet Retail analyst Natalie Berg. ‘They have to accept that shopping habits have permanently changed. We could see more store closures in the future.’
Tesco spent years getting used to criticism for opening new stores. It is now under fire for closing them.