Tesco plays catch-up with pledge for 20,000 UK jobs
LONDON, March 5 – Tesco, the world’s third-biggest retailer, plans to take on 20,000 new staff in Britain as it battles to regain ground lost to rivals in its main market after a shock post-Christmas profit warning.
The supermarket group, which runs around 5,400 stores in 14 countries, also said today it had raised 18.4 billion Thai baht (RM1.82 billion) from listing a property fund in Thailand, providing funds for expansion in the fast-growing Asian market.
British Prime Minister David Cameron hailed the recruitment drive by Tesco, Britain’s biggest private sector employer, as “a massive confidence boost for the UK economy.”
However, the figure is dwarfed by the estimated 700,000 jobs the government is cutting in the public sector as part of its drive to erase the country’s huge budget deficit. Britain’s jobless claimant count rose by 6,900 in January, with the number of young people out of work topping 1 million.
“Any job creation is good news, but the actual boost to the economy in terms of spending power will probably be fairly limited,” said IHS Global Insight chief economist Howard Archer.
“There needs to a lot more job additions to offset what is happening in the public sector and tight job conditions in other areas.”
Some in the retail industry also questioned whether Tesco would actually deliver the 20,000 jobs pledged.
“Supermarkets have a track record of making promises that they can’t keep when it comes to job creation,” said James Lowman, CEO of the Association of Convenience Stores.
Tesco, which makes over 70 per cent of its trading profit in Britain, said its plan would see hundreds of existing stores “refreshed”, with a focus on improving its offers of fresh produce, fresh meat, bakery and counter services. An unspecified number of new stores will also open.
Shares in the firm, which have lost over 21 per cent of their value over the last three months, were down 0.4 per cent at 316.8 pence at 1420 GMT, valuing the business at £25.6 billion (RM122.71 billion).
“The fact is that Tesco has let its stores lag its rivals and it is now playing catch-up, at a time when the world of supermarkets is not standing still,” said independent retail analyst Nick Bubb.
“Many of these (20,000) jobs would have been there in the first place if Tesco hadn’t cut back the level of service in their fresh food departments.”
Tesco, which issued its first profit warning in living memory in January, did not say how much it would spend on the programme, which it described as “the first stage” in its planned investment for the UK business.
Espirito Santo analyst Richard Cathcart forecast the investment in new staff would cost around £260 million.
With industry data having indicated Tesco’s share of the British grocery market fell last month to levels not seen since 2005, analysts expect a more detailed strategy update when it publishes full-year results on April 18.
THAI PROPERTY FUND
Tesco’s Thai property listing is part of a growing trend among retailers to squeeze more value from their real estate assets. They bundle some of their supermarkets and shopping malls into a property fund and sell the fund units to investors, leasing back the property.
Tesco, which has over 800 stores in Thailand, said the initial public offering of the Tesco Lotus property fund was priced at 10.4 baht per unit, the top end of its offer range and confirming a Reuters report.
The fund comprises 17 shopping malls anchored by a Tesco Lotus hypermarket in cities including Bangkok and tourist destinations such as Krabi and Koh Samui.
The IPO is Thailand’s biggest since Rayong Refinery’s US$710 million (RM2.15 billion) offering in 2006, and the second largest equity offering in Asia in 2012 so far behind February’s US$794 million listing by China Communications Construction in Shanghai.
Bank of America Merrill Lynch, Nomura Holdings Inc, Phatra Securities and Royal Bank of Scotland managed the IPO. – Reuters