Tesco's (TSCO) share price jumped today after the retailer announced better than expected Christmas trading in the UK. This suggests new chief executive "Drastic Dave" Lewis, could be steering the blighted supermarket on the right course.
Mr Lewis unveiled his hitherto closely guarded turnaround strategy and announced that Halfords (HFD) chief executive Matt Davies, who was responsible for turning around the cars to bikes and autocentres operation, is to join as boss of Tesco's UK and Ireland business.
Tesco is to deliver £250m of savings a year by restructuring central overheads. That includes consolidating the head office into one location, cutting management jobs and changing working hours. The store building programme is grinding to a halt, and 43 unprofitable stores will close. The defined benefit pension scheme - currently suffering a big deficit - will close to new members.
Some of the supermarket's peripheral businesses also look as if they might be axed. Tesco has already agreed to sell its broadband and Blinkbox businesses to TalkTalk and is "exploring strategic options" for the Dunnhumby business. But income-seeking shareholders will be disappointed at news that the final dividend payment will be scrapped for the 2015 financial year. This dramatic move, along with a reduction in capital spending to £1bn a year - at its peak spending reached £4.7bn - should help tackle the bloated balance sheet. Group trading profit guidance of £1.4bn for the full-year remains intact.
Meanwhile, Marks & Spencer (MKS) reported a 6 per cent decline in sales of general merchandise in the quarter over Christmas. The retailer blamed the poor performance on the weather and disruption at its distribution centre.
