The days of Tesco’s rampant expansionism are fast becoming a dim memory. Battered by falling sales, stunned by an accounting scandal and undercut by invading Germans, the supermarket is instead retreating to a more defensible position.
Tesco’s boss Dave Lewis has instructed estate agent Savills to sell six of its largest plots of land, according to the Telegraph. This includes a £60m site in Wolverhampton, three more proposed developments in the West Midlands and two in Yorkshire. They're likely to be used for homes - and if the one thing we don't need is more supermarkets, the one thing we do need is more houses.
It follows his admission in the Sunday Telegraph that Tesco would only build 170,000 sq ft of new stores this year (five times less than Aldi) and a property swap with British Land last week that saw it pick up £96m and regain ownership of 21 of its supermarkets in exchange for its stakes in some retail parks and shopping centres. In January, Tesco announced 43 existing stores would close.
This is clearly a retreat, but as Sun Tzu will tell you, retreat isn’t always a sign of weakness. The cash raised from the land sales and swap will help plug the £263m black hole in Tesco’s finances that caused such harm to its reputation last year. By doing this and also replacing so many of the firm’s old directors, Lewis is trying to put that mess behind them. Whether the Serious Fraud Office will let him, of course, is another matter, but it’s a step in the right direction.
More to the point, what’s the point of Tesco hanging onto that land? Big superstores are so 2004. Tesco is an empire that had been severely overstretched. Lewis’ strategy is clearly to restore the financial health of the firm and pull it back to more manageable borders, and he’s not exactly holding back in its execution. Few would say it’s too little, then, even if many might say it’s too late.