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Tesco scraps plans to build 49 ‘larger’ supermarkets

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Tesco has scrapped plans to build 49 new ‘larger’ supermarkets as it announced it would slash its capital expenditure budget by half to £1billion in 2015/16

According to the AJ’s sister title Construction News, the 49 sites across the country amount to 168,000m² of planned space that will no longer be built out.

Tesco chief executive Dave Lewis said some of the plans had ‘been around for a very long time’ because it ‘takes time to build up parcels of land’ for larger stores, but that it was ‘not very sensible’ to build out the stores.

He said Tesco had written to the communities involved to inform them that the planned stores would no longer be built.

The retail giant said it would introduce a ‘significant cost-efficiency programme” in a trading update covering the 19-week period to 3 January 2015.

It said there would be a ‘significant revision’ to Tesco’s store building programme to “strengthen the balance sheet”, and it will also close 43 existing stores that are unprofitable.

In a trading update at the end of August 2014, Tesco announced it would slow the roll-out of its store refurbishment programme as it cut capital expenditure by £400m to £2.1bn in the 2014 financial year.

Tesco today announced its capital expenditure budget in 2015/16 would be slashed by half to £1bn in 2015/16.

Tesco chief financial officer Alan Stewart said £1bn was ‘the right level of cap ex’ and that he did ‘not believe the business is going to suffer’ as a result of the cut.

The grocer maintained guidance that its group trading profit in 2014/15 would be no more than £1.4bn, compared with a full-year profit of £3.3bn in 2013.

In November, Sainsbury’s scrapped 40 pipeline supermarket schemes as it reported a fall in profits and like-for-like sales in the first half of 2014/15.

Tesco UK’s performance improved over the Christmas period as like-for-like sales fell by 2.9 per cent in the 19-week period to 3 January, compared with like-for-like sales down 5.4 per cent in the previous quarter.

Lewis said: ‘We have some very difficult changes to make. I am very conscious that the consequences of these changes are significant for all stakeholders in our business but we are facing the reality of the situation.

‘Our recent performance gives us confidence that when we pull together and put the customer first we can deliver the right results.’

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