Tesco has sold Blinkbox and Tesco Broadband to TalkTalk for an estimated £25m, it was revealed today (8 January) in the retailer’s trading statement and strategy update.
David Lewis, chief executive of the struggling supermarket, explained the decision came as part of an effort to deliver savings of £250m per year as it tried to recover from the £263m profits overstatement which came to light last year.
Speculation of a sale has been rife since last October when details of a meeting between senior executives at Tesco and Blinkbox were revealed.
Tesco also confirmed that its had appointed Goldman Sachs to explore strategic options for its Dunnhumby business – including a potential sale, sale of shares or IPO.
“This is a business people have expressed a lot of interest in and we’re asking Goldman to review all of these options,” Lewis said.
In addition to the sale of assets Lewis announced that 43 stores across the country would close as well as a consolidation of its head office locations. He declined to comment on how many jobs would be lost as a result of the closures.
“These are the first steps to strengthening our balance sheet,” he continued, later adding that “the store closures would be “driven by the economics of the stores” and not the locations.
“Stores that are cash unprofitable is a loss we can no longer bear,” he said.
Plans for nearly 50 future projects – mainly the build of several superstores – which it now “simply cannot afford” have also been axed.
However, Tesco has also vowed to simultaneously invest in price cuts as it continues to "listen to customers" and offer "more stable consistent prices" ahough Lewis refused to put a figure on exactly how much would be invested.
Overall, like-for-like sales were down 2.9 per cent in the 19 weeks to 3 January. Christmas failed to help the retailer recover as it suffered a 0.3 per cent drop in like-for-like sales for the six-week period.
Finally, former Halfords CEO Matt Davies was named the new boss for Tesco’s UK and Ireland business. Davies will be joining Tesco on 1 June, replacing Chris Bush, who was one of several executives suspended as part of the investigation into the profit overstatement.
Four executives remain suspended as part of the ongoing investigation into the accounting error
Lewis said he will continue to focus on rebuilding trust and transparency in the brand following the scandal.
Analyst Phil Dorrell, director of the retail consultancy Retail Remedy, said Lewis has set about the task of plugging the leaks "with aplomb.”
"After a 2014 that was little short of disastrous, the Tesco supertanker was holed below the waterline. Turning it around fully could take years, but the new chief executive has at least begun to staunch some of the losses.
"The balance sheet is still weighed down, and there is much more trimming to be done. But the new man at the top has started well and is getting more right than he gets wrong. He is also savvy enough to manage expectations, and is under no illusions that the brand faces a long haul.
"Bloated by years of good living, Tesco is like the army of middle-aged men who this month took out gym memberships. While it can only marvel at the lean physiques of the young upstart discounters, shedding its own flab will be slow and painful; and memories of its youthful vigour will count for nothing. But the Christmas numbers, modest though they are, at least suggest the pain will be worth it."