Retailer Tesco this morning gave its broadest hint so far that it might place restaurant brand Giraffe and its investment in Harris + Hoole on the market, after admitting it is reviewing all opportunities that exist within the group to “generate value and create headroom”.
Reporting a drop in half-year UK like-for-like sales of 4.6%, new chief executive Dave Lewis said: “We have three immediate priorities. The first is restoring competitiveness in our core UK business. The second is protecting and strengthening our balance sheet. The third is to begin the long journey of rebuilding trust and transparency in the business and the brand.
“Our relative performance was not competitive enough in the first half of the year and the business continues to face a softening market and tough trading conditions, particularly in the UK. In this challenging environment we will continue to invest for customers.
“We are reviewing all opportunities that exist within the Group to generate value and create headroom. Full year profitability could therefore be further impacted by actions we choose to take.”
The company reported that UK trading profit declined by (55.9)% year-on-year to £499m with a trading margin of 2.34%, a reduction of (283) basis points. It said that this was driven primarily by the impact of reduced like-for-like sales, its continued investment in the customer offer and inflation in its cost base.
In line with its plans for a lower level of new store openings, the contribution from net new space fell to 2.1% for the half year. It will open 0.5 million square feet of net new space in the second half, with the majority in our Express and One Stop convenience formats.
The group completed 262 store refreshes in the first half, including over 200 Express stores. It will reduce its level of capital expenditure for the rest of the year, resulting in a slower roll-out of its Refresh programme, which includes its larger Extra stores.
