Tesco chief executive Dave Lewis has vowed to regain the troubled grocer’s price-competitive edge and acknowledged its debt is too high.
Although he played down the seemingly relentless march of Aldi and Lidl, comparing their combined share of 10% to that of Fine Fare and Kwik Save in the early 90s, Lewis recognised that Tesco had become too expensive.
“The price gap got too great and that’s why you have seen some of the things that we have done since January,” Lewis said. “It’s our job to be competitive in all aspects and at all ends of the market. That includes the opening price point in any category in the market.”
Lewis also told the Daily Mail that capital expenditure-fuelled growth may “not now be the right model” and added the “balance sheet of the business probably wasn’t affordable”.
Tesco’s debt, including the costs of capitalised long leases and the pension deficit, is £22bn “and that is a figure we have to start thinking about”, Lewis said. “The financing is fine. The issue for the group is the amount of debt.”
Lewis, who joined Tesco in September from Unilever, has had to grapple with the accounting scandal and a Serious Fraud Office investigation, as well as tumbling sales in the face of the discounters.
He has begun to radically restructure the business, including planning to close the Cheshunt head office, selling off businesses including DunnHumby, and making up to 10,000 redundancies.
But Lewis is optimistic about the future, and believes he can grow Tesco’s 30% share of the market. “The optimist in me says that is only three out of ten, so there is some upside,” Lewis said.