Tesco Plc Removes Contract Cleaners, Shops to be Cleaned by Staff

Summary

• Tesco removes contract cleaners and has reportedly handed over extra work duties to the staff at nearly 2000 of its stores
• Tesco had been using third party contract suppliers for cleaning the stores
• Customers across the world have moved to digital and delivery, signalling a new normal for the food retail sector.

There has been a recent report that after the easing of the Covid-19 restrictions, the grocery sales in Britain has been slowing down. Reportedly the data showed that all the “big four” supermarket group members, Morrisons, Tesco, Sainsbury’s and Asda maintained strong growth in 12 weeks to July 11, led by Morrisons with almost 16 per cent growth. Tesco has also reported double-digit growth during the period, but its latest decision has surprised many apart from its staffs, who are overburdened with rising demand.

Tesco has reportedly handed extra amount of work to its staffs in around 2,000 of its stores after it removed its cleaning contractors. The duties of the contract cleaners covered washing windows to mopping floors, which are being moved to its own store staff.

In order to cut down on the cost, Tesco PLC has undertaken the step to remove its contract cleaners and transfer the duties to its store staffs in 1,920 of its outlets. The workers employed at its smaller Metro and Specific supermarkets are expected to start their additional duties from 24 August 2020. The tasks will involve cleaning the floor and windows, along with the cabinets and fridges. They will also be required to clean their break rooms and toilets. As reported by the company, a trial has already been done, which had resulted in better and constant needs of hygiene.

Reportedly, Tesco workers have been saying that doing all of the cleaning work could be a "psychological blow" for an already overstretched workforce. Tesco workers have been promised to be provided with training activities on how to carry out their new duties. Tesco has mentioned that presently they are using third-party suppliers for cleaning purpose. It was also reported that the trial, which was carried out has been successful, leading to this finding that giving the outlets more ownership and managerial control is better. The company will now try to incorporate it in all its Express stores and convenience Metro stores.

Retailers who were selling non-essential items were compelled to close down their operations due to the lockdown restrictions and are still struggling to regain their businesses. On the other hand, the supermarkets selling essential items (grocery) have been massively benefitted as Britons were forced to stay indoors and eat their meals at home.

About Tesco

Established in 1947, Tesco PLC (LON:TSCO) is a leading supermarket of the United Kingdom providing consumer services. Having a workforce of approximately 400,000 employees, it serves millions of its customers through brick and mortar outlets as well as through online platforms. It is engaged in retailing business and other related activities such as retail banking and insurance services.

Financial Highlights

Recently, Tesco PLC released its trading statement for the first quarter of FY20-21. By refocusing the offer on availability and everyday low prices, promotional participation reduced from 28 per cent to 14 per cent. The company also saw significant shifts in product and category mix as customers focused more of their purchases on essential items. In the United Kingdom, food sales grew at approximately 12 per cent, whereas discretionary categories such as clothing faced a decline in sales of roughly 20 per cent. Sales in general merchandise recovered through the quarter, followed by a sharp initial reduction, across categories such as - toys, home, stationery and electrical, growing strongly year-on-year, as customers increasingly looked to add these items to their weekly shop. Fuel sales, which were excluded from the company's headline sales performance, declined by approximately 50 per cent.

Significant changes in the operations of the company's as a result of the response to COVID-19 has led to a substantial increase in costs, with the main impact in the United Kingdom. A major portion of which relates to the paid leaves of 26,000 employees and the recruitment of 47,000 temporary employees to meet the increasing demand. A charge of approximately £65 million was incurred for the provision of safety-related consumables and personal protective equipment across all of the 3,628 stores. The total estimation of the incremental costs for the United Kingdom for the full year is around £840 million.

Total sales in its UK & ROI business increased by 9.2 per cent. Overall, Booker's sales also grew by 6.1 per cent, including a 5 per cent contribution from Best Food Logistics, which was acquired in early March. Sales growth in Central Europe saw an increase of 3.3 per cent, (excluding Poland).

Stock Performance

Tesco PLC (LON: TSCO) stock was trading at GBX 214.20 on 23 July 2020, at 10:17 AM, down by 0.09 per cent from its previous close of GBX 214.50. The 52-week low/high price was recorded at GBX 211.20/258.90. It was having a market capitalisation (Mcap) of £21,007.05 million. The volume traded at the time of reporting was 2,320,039. The company recorded a negative return on price, which was 16.15 per cent on a YTD (Year to Date) basis.

Let us have a look at the performance of other supermarkets in the present scenario

The spread of the Covid-19 pandemic worldwide has impacted the consumer behaviour, demand of products, and retail stores. Consumers had almost given up on the purchase of discretionary items in favour of food and household supplies, resulting in the fashion, furniture, and electronics retailers being hit hardest.

Grocery and food retailers have responded positively to the increased demand due to the unprecedented crisis that has strained the entire ecosystem. This has given rise to an environment ready for development, with a need to fix the supply chains.

J Sainsbury PLC (LON:SBRY) stock was trading at GBX 190.10 on 23 July 2020, at 11:59 AM, up by 0.32 per cent from its previous close of GBX 189.50. The 52-week low/high price was GBX 174.95/235.80. It was having a market capitalisation (Mcap) of £4,209.71 million. The volume traded at the time of reporting was 1,702,832. The company recorded a negative return on price, which was 18.35 per cent on a YTD (Year to Date) basis.

WM Morrison Supermarkets PLC (LON:MRW) stock was trading at GBX 185.10 on 23 July 2020, at 12:07 PM, up by 0.38 per cent from its previous close of GBX 184.40. The 52-week low/high price was GBX 164.20/208.60. It was having a market capitalisation (Mcap) of £4,434.93 million. The volume traded at the time of reporting was 558,219. The company recorded a negative return on price, which was 8.89 per cent on a YTD (Year to Date) basis.

Ocado Group PLC (LON: OCDO) stock was trading at GBX 2,143.00 on 23 July 2020, at 12:09 PM, up by 0.66 per cent from its previous close of GBX 2,129.00. The 52-week low/high price was GBX 1,064.00/2,229.00. It was having a market capitalisation (Mcap) of £15,922.03 million. The volume traded at the time of reporting was 1,481,047. The company recorded a positive return on price, which was 69.04 per cent on a YTD (Year to Date) basis.