Tesco is stripping out a layer of management from its stores in a move that puts up to 1,700 jobs at risk, in the latest effort by the UK’s biggest supermarket chain to cut costs by £1.5bn.
The company said it wouldremove people managers, who handle recruitment and other personnel matters, compliance managers, responsible for health and safety, and customer experience managers, who oversee service in 226 of Tesco’s largest stores.
Their responsibilities will be shifted to 900 new roles, which will handle matters such as human resources across multiple stores and in Tesco’s distribution network.
The latest wave of job cuts are part of a plan to slash £1.5bn from Tesco’s cost base. It comes after up to 1,200 head office jobs were cut last summer. The supermarket’s Cardiff call centre closes this month, with a loss of 1,100 jobs.
Speaking about the latest round of cuts, Matt Davies, chief executive of Tesco’s UK and Ireland business, said: “These changes remove complexity and will deliver a simpler, more helpful experience for colleagues and customers. We recognise these are difficult changes to make, but they are necessary to ensure our business remains competitive and set up for the future.
“We hope to retain as many colleagues as possible in the new roles we have created and in the vacancies we currently have available.”
Pauline Foulkes, national officer for the shopworkers’ union Usdaw, said the changes were “a further upheaval for Tesco managers”. She said the union would be entering talks with the supermarket chain in an attempt to minimise redundancies and help its members stay employed in a suitable role within the business if that was what they wanted.
Supermarket chains are having to rethink their businesses amid aggressive competition from Aldi and Lidl as well as a switch to shopping online and in small local stores. Costs are rising with the national living wage increasing to £7.83 an hour in April after going from £7.20 to £7.50 last year. Business rate changes and the apprenticeship levy have also added to costs.
Food price inflation has benefited the supermarkets in some ways over the past 18 months, helping them to deliver sales increases. But they have also had to absorb some commodity price increases partly driven by the fall in the value of the pound since the Brexit vote, as cash-strapped consumers shop around to keep costs down.
In his first year in charge, the Tesco chief executive, Dave Lewis, axed nearly 5,000 head office and UK store management jobs. More than 2,500 jobs were lost with the closure of 48 underperforming Tesco stores, and 3,000 put at risk when the chain cut night shifts in some supermarkets.
Sainsbury’s, Morrisons and Waitrose and Asda have also cut jobs as all the big grocers try to keep costs down.
In October, Sainsbury’s announced plans to eliminate 2,000 store and back-office roles as the supermarket chain looks to cut costs by £500m. Thousands of Asda workers at 18 underperforming stores also faced redundancy or a reduction in their working hours last summer.
Tesco’s latest round of cuts comes after it chalked up underlying growth of 1.9% over Christmas. Lewis said the chain had enjoyed “phenomenal” growth in food but non-food sales were disappointing and City investors complained the business had not delivered the “slam dunk” expected.
Tesco blamed the disappointing performance on disruption caused by the collapse of the grocery distribution firm Palmer & Harvey, which supplied cigarettes and other tobacco products to its stores, as well as poor sales of TVs and other non-food items.
British consumers spent an extra £1bn on groceries this Christmas as they shrugged off concerns about the economy to increase sales by 3.8%, slightly ahead of inflation.
Aldi and Lidl both increased sales by a combined 16.8% in the three months to 31 December as they drew in 1m more shoppers, according to data from Kantar Worldpanel, while the big four supermarkets all lost market share.