Tesco has sold its South Korean Homeplus stores, for £4.2 billion ($6.7 billion) as the troubled supermarket chain seeks to shore up its balance sheet.
The proceeds will be used to pay down debt and help revitalize Tesco’s UK business.
Tesco is the UK’s biggest supermarket chain and the world’s third largest retailer after Wal-Mart and Carrefour.
Homeplus is being bought by MBK Partners, a South Korean buyout company set up a decade ago.
It has partnered with a Canadian pension fund and Singapore’s Temasek Holdings for the deal.
Dave Lewis, chief executive of Tesco, said: “This sale realizes material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet.”
After tax and other costs the sale will produce £3.35 billion ($5.6 billion) in cash for Tesco and is expected to be completed before the end of the year.
The Homeplus deal is the first major disposal since Tesco reported a record pre-tax loss of $10.2 billion for the year to February.
That compared with annual pre-tax profit of $3.36 billion a year earlier.
It was the biggest loss reported by a UK retailer and one of the largest in the country’s corporate history.
Tesco has faced challenges on several fronts in recent years.
Hard discounters such as Aldi and Lidl have been eroding the market share of the big four supermarket chains, while Tesco has struggled with excess floor space in out-of-town superstores.
Shoppers have moved away from doing one big weekly shop at such stores in favor of topping up more frequently from high street convenience stores.
Homeplus has 140 hypermarkets, 375 supermarkets and 327 convenience stores.
The MBK Partners consortium said it planned to invest 1 trillion won ($874 million) in Homeplus over the next two years to increase its competitiveness.
British retailer Tesco has reported the worst results in its history with a record statutory pre-tax loss of $9.5 billion for the year to the end of February.
That compares with annual pre-tax profit of $3.35 billion a year earlier.
It is the biggest loss suffered by a UK retailer and one of the largest in the country’s corporate history.
Around $7 billion of the losses were the result of the fall in property value of its UK stores, 43 of which it said would close earlier this month.
The decline in the value of its property portfolio comes as a direct result of falling footfall in many of its out of town superstores.
Tesco CEO Dave Lewis admitted it had been “a very difficult year for Tesco”.
He added: “The results we have published today reflect a deterioration in the market and, more significantly, an erosion of our competitiveness over recent years.
“We have faced into this reality, sought to draw a line under the past and begun to rebuild, and already we are beginning to see early encouraging signs from what we’ve done so far.”
Dave Lewis added that he expected conditions in the coming financial year to remain challenging.
However, investors reacted positively to the results.
Tesco’s share price rose by more than 1% in early trading on the London Stock Exchange.
The results cap a tumultuous year for the supermarket giant which is still being investigated by the Serious Fraud Office (SFO) after it overstated its half-year profit forecast in August by $389 million.
Annual group trading profit, which counts sales through the supermarket’s tills was also down 60% at $2 billion, compared with $4.9 billion a year earlier.
Tesco company said the performance of its European stores disappointed as a result of “strong competition from discount retailers” which held back its sales performance, particularly in Ireland which saw a like-for-like sales fall 6.3% in the year.
In Asia, Tesco said trading profit was $836 million, once currency fluctuations were stripped out, 15.3% lower than a year earlier a result of sales falling in South Korea, Thailand, and Malaysia.
Tesco said it had also agreed a plan with the trustees of its pension scheme to pay $400 million a year to help mend its $5.75 billion pension deficit.
The company has started a consultation with staff to replace the current defined benefit pension scheme with a cheaper defined contribution scheme.
Tesco has named the 43 stores it is closing across the UK, a move that will see 2,000 staff lose their jobs.
The supermarket giant is currently informing staff at the affected stores.
The Express and Home Plus stores will close on March 15 with the Tesco Metros and Superstores on the list closing on April 4.
Tesco warned earlier this month that 43 stores would be shut as part of plans to cut costs.
The company’s CEO Dave Lewis said the decision to close the stores was “exceptionally difficult”.
“Our priority is to explain what this announcement means for our colleagues and, wherever possible, offer them alternative roles with Tesco,” he added.
Superstore closures include those in Doncaster and Chatham, while the DIY and homeware Homeplus closures include stores in Edinburgh and Southampton.
In total, 18 Express, 12 Metro, seven superstores and six Homeplus stores are shutting their doors.
Tesco’s announcement marks a stark contrast to Tuesday’s update from online grocery shopping Waitrose that detailed plans to create 2,000 jobs in new shops and by expanding existing sites.
The retailer is opening 14 new shops from spring this year, seven of them smaller convenience outlets.
However, of the so-called “big four” supermarkets, which includes Tesco as well as Sainsbury’s, Morrisons and Asda, most are shelving expansion plans or even closing stores.
In November, Sainsbury’s said it was scrapping plans for new stores, while Morrissons plans to close 10 loss-making stores this year.
Supermarket giant Tesco has been accused by Greenpeace of stocking a brand of tuna that is caught in a way that can harm other wildlife.
Greenpeace said Tesco pledged in 2012 to ensure all its own brand tuna was sustainably caught.
But the group says Tesco has started to stock tinned tuna from low-cost brand Oriental and Pacific which it says is caught in large nets.
Tesco said Greenpeace was “simply wrong” and the manufacturer said it “totally refutes” the claims.
Greenpeace claimed the brand was “dirty” because tuna in it was caught in big nets, known as purse seines, that could kill sea creatures.
The environmental group said Tesco “must try harder” to make sure tinned tuna was sustainably caught.
Tesco has been accused by Greenpeace of stocking a brand of tuna that is caught in a way that can harm other wildlife
Greenpeace said Sainsbury’s was at the forefront of sustainable tuna, and Waitrose, the Co-operative, Marks and Spencer, and Morrisons were also praised.
Campaigner and celebrity chef Hugh Fearnley-Whittingstall, who is featuring the issue on his Fish Fight programme on Channel 4 on Sunday, called on Tesco to take the brand off its shelves.
Tesco said it had moved much faster than many of its competitors to make sure its own-brand tuna was 100% caught using a pole and line, which avoids catching other species by accident.
It said it had also promised to use sustainable tuna in other products such as pastas, sandwiches and salads.
A spokesman said: “Many of our competitors continue to sell non-pole and line caught tuna. Customers have a great choice of sustainable tuna at Tesco.”
LDH, which owns the Oriental and Pacific (O&P) tuna brand, supplies a range of products including canned tomatoes, fish, fruit and vegetables, and dried pasta.
In a statement, the company said: “At least 85% of the tuna we sell is fished using the pole and line method; our O&P brand skipjack tuna is caught using the purse seine fishing method, which accounts for 63% of all tuna caught around the globe.
“Credible scientific research by the Regional Fisheries Management Organizations shows that stocks of skipjack tuna are healthy.
“All of our tuna suppliers are members of the International Seafood Sustainability Foundation and support its research-led initiatives for long-term conservation of tuna stocks.”
UK retailer Tesco’s DNA tests have revealed that some of its Everyday Value Spaghetti Bolognese contain 60% horsemeat.
The meal, withdrawn from sale on Tuesday, came from the French factory producing Findus beef lasagne, also at the centre of a row over horsemeat.
Meanwhile, Environment Secretary Owen Paterson has told MPs of plans to test all processed beef in the UK.
Romania has rejected claims that it was responsible for wrongly labeling horsemeat from its abattoirs.
Tesco took the frozen bolognese off the shelves when it found out Findus was concerned about the source of its meat at the Comigel processing plant in Metz, north-eastern France.
It is one of several products that have been withdrawn from UK shelves amid the current scandal over horsemeat in food products in the UK and Europe.
Tesco Group technical director Tim Smith said: “The frozen Everyday Value Spaghetti Bolognese should contain only Irish beef from our approved suppliers. The source of the horsemeat is still under investigation by the relevant authorities.
“The level of contamination suggests that Comigel was not following the appropriate production process for our Tesco product and we will not take food from their facility again.
“We are very sorry that we have let customers down.”
Owen Paterson told MPs he had called in representatives of all Britain’s producers, retailers and distributors and “made it clear” he expected to see immediate testing of all processed beef products across the supply chain.
He said testing should take place every three months, and the Food Standards Agency should be notified of results.
Owen Paterson told representatives from the British Retail Consortium, the Food and Drink Federation, the British Meat Processors Association, the Federation of Wholesale Distributors, the Institute of Grocery Distribution and individual retailers that he expected to see:
“meaningful results from this testing by the end of this week”;
“more testing of products for horse along the supply chain and that the industry must co-operate fully with the FSA on this”;
“publication of industry test results every three months through the FSA”;
“and that they let the FSA know as soon as they become aware of a potential problem in their products”.
Tesco’s DNA tests have revealed that some of its Everyday Value Spaghetti Bolognese contain 60 percent horsemeat
In the Commons, Labour’s Mary Creagh accused Owen Paterson of being too slow to respond as incidents emerged.
“The secretary of state had to be called back to London from his long weekend to deal with the crisis,” she claimed.
“Until Saturday’s panic summit, he hadn’t actually met the food industry to address this crisis.”
News of the tests came after Romanian PM Victor Ponta earlier on Monday denied two abattoirs in his country sold horsemeat purported to be beef to European food companies.
The abattoirs had been linked to the contamination of processed meat products sold in Europe. Victor Ponta said checks were carried out and there had been no breach of rules and standards.
In France, consumer affairs minister Benoit Hamon said that the whole of the food industry would be under heightened surveillance, with more random sampling of products and wider use of DNA tests to determine the origin of meat.
French inspectors were at the Comigel headquarters in Metz in north-eastern France on Monday. Findus meals were made by the company at its Luxembourg factory.
Investigators were also at the offices in the south of France of the importer Spanghero, which brought the meat to France from Romania.
Last week Findus UK took its frozen beef lasagne, made by Comigel, off the shelves after some samples were found to contain up to 100% horsemeat.
Seven French supermarkets have withdrawn frozen ready-meals made by the company.
The controversy surrounding contamination of meat products has also affected firms in the Irish Republic and Poland.
Last month, Irish food inspectors announced they had found horsemeat in some burgers stocked by a number of UK supermarket chains, including Tesco, Iceland and Lidl.
And on Monday night, one Dutch supermarket chain took its Prima Frost brand of lasagne off the shelves amid fears it may contain horsemeat.
Owen Paterson said he would meet with his European counterparts and the European Commissioner for Health and Consumer Policy Tonio Borg later this week in the wake of the scandal.
“At the moment this appears to be an issue of fraud and mis-labeling.
“But if anything suggests the need for changes to surveillance and enforcement in the UK we will not hesitate to make those changes,” he said.
Tesco announced ending of its support for the Cancer Research “Race for Life” while deciding to sponsor UK’s largest gay festival, Pride London.
Tesco has triggered outrage after its decision and some religious commentators and groups have condemned its action and are calling for a boycott of the supermarket chain.
The chain has worked with Cancer Research for more than ten years, raising hundreds of millions of pounds to help combat an illness that will affect one in three of the population.
Tesco’s main contribution was support for the annual fundraising Race for Life, the Britain’s largest women-only charity event, which has raised more than £400 million ($600 million) for the fight against cancer since it began in 1994.
Shortly after Tesco announced the partnership would end, the firm said it would be a headline sponsor of Pride London.
Pride London is UK’s largest gay pride event, and will be adding a second day next year when it hosts the global WorldPride 2012 festival in July.
Tesco’s chief executive of retailing services, Andrew Higginson, said: “Our <<Out at Tesco>> team will be working closely with Pride London to ensure next year’s event is even more fun.”
Francis Phillips, a commentator at The Catholic Herald, condemned the shift, saying: “Tesco is a supermarket.
“Its remit has been to sell good-quality food and other items at very reasonable prices, and in this it has been hugely successful.
“Why has it now aligned itself with an aggressive political organization such as Pride London?
“Why has it given up its sponsorship of Cancer Research? Or at least…why hasn’t it taken up with another mainstream charity such as the British Legion or Age UK?
“There are thousands of ex-servicemen and wounded soldiers needing help in this country, and millions of elderly people in danger of neglect.
“They are a fundamental part of the fabric of our society – the kind of fabric that Tesco should be reflecting.”
Tesco announced ending of its support for the Cancer Research "Race for Life" while deciding to sponsor UK’s largest gay festival, Pride Londono
David Skinner from the Anglican Mainstream organization, which supports traditional marriage and family life, has written to complain to Andrew Higginson and Tesco chief executive Philip Clarke.
David Skinner wrote: “For Tesco to sponsor a tiny homosexual minority – according to the Office for National Statistics, that amounts to little more than 1% of the population – will be showing the utmost contempt for a large proportion of British society that still adheres, more or less, to the morality and values of the Ten Commandments.”
Both Francis Phillips and David Skinner are calling on consumers to boycott Tesco.
“Let’s send Tesco a message: stick to groceries and stop dabbling in dubious fringe political movements,” said Francis Phillips.
Catholic campaign website Protect the Pope said Tesco’s decision was “a sign of how out of touch they have become from ordinary families”.
Cancer Research UK, which gave no sign of disappointment about losing Tesco’s support, is looking for a new partner for the Race for Life.
Emma Gilbert, who organizes the event, said the partnership “came to a natural end” for both parties.
“Tesco employees have taken part in events across the UK, raising over £7 million [$10 million] for our life-saving research, and we hope they will continue to take part in the events.”
Tesco said it was in talks with Cancer Research UK to support its work in other ways and would encourage staff to continue taking part in the Race for Life.
A spokesman said the decision to drop its support “is not connected to our £30,000 [$45,000] sponsorship for Pride, which is one of hundreds of community and charitable events that we will be supporting next year”.
Pride London chairman Paul Birrell said: “Whilst Pride is organized entirely by volunteers, it costs in excess of £800,000 [$1.2 million] to run each year.
“We are proud that Pride London remains a free event, but this is only possible because of companies like Tesco and their generous support.”
Paul Birell added that Tesco’s contribution would be used to run an entertainment area for families and children at next year’s festival.
Tesco pushed prices up on hundreds of products few weeks prior to £500 million price cutting campaign “Big Price Drop”, it was revealed today in British media.
Tesco raised prices for a few days and was able to say customers were making big savings.
According to The Times, there are many examples of raised prices and then cut by Tesco in the new Big Price Drop campaign:
Tesco 750g Fruit and Nut Museli went from £1.28 on August 16 to £1.89 on August 23 – before “dropping” to £1.75 on September 26;
Sliced Mushrooms – 250g – August 30: 85p; September 6: 97p; September 26: 87p;
Tesco Value Unsalted Butter – August 23: £1.10; August 30: £1.19; September 26: £1.10
Tesco Value Unsmoked Back Bacon – August 16: £1.44; August 23: £1.57; September 26: £1.44;
Oxo Beef Stock Cubes – 12 pack – August 16: 99p; August 27: £1.07; September 26: 99p;
Loose Carrots – August/September: 70p per kg; One week at 80p; September 26: 56p;
Surprisingly, after the “price cut”, the Tesco customers were even paying more than they had been six weeks before.
Tesco pushed prices up on hundreds of products few weeks prior to £500 million price cutting campaign “Big Price Drop”,
Hundreds of Tesco products that have been reduced are either selling for the same amount they were six weeks before the Big Price Drop campaign or have been cut only by a small amount.
Tesco said they had slashed prices on 3,000 items by up to 35%.
It was reported that in one four-page advert which featured 12 items which had their prices slashed, 4 of them had been on sale at the same lower price in the weeks beforehand.
A spokesman for Tesco admitted some products would have been on offer in the weeks before the campaign was launched.
“Given the current economic situation and inflation levels it is not surprising, and a factor for every supermarket that some prices on some products will have gone up in the weeks before Big Price Drop.
“In addition, with more than 3,000 products included, inevitably some will have been on promotion in the previous weeks.
‘With the Big Price Drop we are reducing prices on thousands of products our customers need to buy every week aiming to reduce the inflation that they have been experiencing on their weekly shop.
“It is real and sustained investment of £500 million.”
Tesco launched their Big Price Drop promotion campaign on September 27 just days before announcing their worst sales figures in 20 years.
Shoppers bought less food, switched to rivals and turned away from luxury purchases because of the living standards squeeze as sales fell by 1%.
After the supermarket launched Big Price Drop campaign, it was revealed that a basket of 33 staple items from Tesco now costs £58.37, which is up by £1.34 since the promotion began.
A computer error at the Tesco’s tills enabled surprised customers to pick up Terry’s Chocolate Orange for just 29p each – a tenth of their value.
Shoppers, who have taken advantage of the glitch at Tesco, filled their trolleys with boxes of Terry’s Chocolate Orange – advertised on TV by comedian Dawn French – and cleared entire stocks.
One shopper bought 192 packs of Terry’s Chocolate Orange, which normally has a retail price of £2.75, for just £57 – saving a staggering £471.
A shopper, who have took advantage of the glitch at Tesco, bought 176 boxes of Terry’s Chocolate Orange and posted the photo on internet
The rush started because two independent Tesco discounts were applied at the same time rather than consecutively:
1. Buy-one-get-one-free (BOGOF) offer is equal to £1.375 pounds per orange, half the £2.75 retail price.
2. £3.25 for every three you purchase (three for £5 when that many would normally cost £8.25).
So, if you buy six Terry’s Chocolate Orange, it would cost £16.50, less £6.50 (the three for £5 discount) and also less £8.25 for the BOGOF deal.
The total cost is therefore £1.75 for six packs of Terry’s Chocolate Orange – or just over 29p each.
The discount error is believed to have affected all main UK Tesco “Extra” supermarkets as well as their Metro stores – around 1,250 in all – but not the smaller Express outlets.
A spokesman for Tesco would not say how many Terry’s Chocolate Orange products were sold or how much it had cost the company.
Within hours, a Facebook page called “Terrys Chocolate orange glitch, I was there” has been created and flooded with people posting photos of their chocolate hordes as well as their receipts.
A Facebook page called “Terrys Chocolate orange glitch, I was there” has been created and flooded with people posting photos of their chocolate hordes as well as their receipts
In the same time, the glitch had been posted on a money-saving website and 57 pages of comments had been posted from excited shoppers.
It was reported that people visited five different stores after clearing each shops’ shelves to make the most of the deal.
They were able to combine a three-for-£5 deal on another Terry’s Chocolate Orange with BOGOF offer.
A Tesco receipt was posted on Facebook showing how the two offers were combined at the till and resulted in a massive discount
However, the tills applied a further discount only when Terry’s Chocolate Orange was bought in multiples of six.
That meant Terry’s Chocolate Orange, which usually sells for £2.75, was being sold for 10% of the original price.
The Terry’s Chocolate Orange’s deal was first posted on money saving website www.hotukdeals.com at about noon on Tuesday.
After few minutes, the shoppers posted photos of their receipts – the first showed £8.95 being spent just on Terry’s Chocolate Orange, with £73.15 being saved.
According to a spokeswoman for Tesco, the error only lasted only “a couple of hours”.
She added: “We deal with 35,000-40,000 products, so sometimes these things happen. We have made lots of people very happy.”
“We are putting steps in place to make sure that it does not happen again.”
Kraft Foods, the producer of Terry’s Chocolate Oranges, were unavailable for comment.
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