Tesco axing 500 jobs in distribution centre shake-up

Tesco (Frankfurt: 852647 - news) says 500 jobs are to be lost as it completes a shake-up of its UK distribution network.

Britain's largest supermarket chain said it was to shut two of its distribution centres - Welham Green in Hertfordshire and Chesterfield - with 1,000 jobs made redundant.

It said the changes it was making, to "simplify" the system, would mean 500 roles being created - mainly at its distribution centres in Reading and Middlesbrough.

They also involved, Tesco said, bringing in-house warehouse operations run by DHL and Wincanton (LSE: WIN.L - news) .

The changes were announced as the industry faces up to the challenge of rising prices - largely a result of the collapse in the value of the pound since the EU referendum.

That has made buying goods from overseas more expensive for supermarkets and is expected to herald, soon, the end of deflation - falling prices - in the grocery sector.

The price increases, highlighted by the so-called Marmitegate episode, have left chains under pressure to pass on those additional costs to shoppers to protect profits - but not price themselves out of what remains a fiercely competitive market.

Tesco said the changes it was making to its distribution network merely reflected changing customer habits.

Its UK boss, Matt Davies, said: "It's vital we transform our business for the future.

"As part of this, we are proposing to close two of our distribution centres in the UK.

"These changes will help to simplify our distribution operations so we can continue to serve our customers better.

"Our priority throughout this process has been our colleagues and we will continue to do all we can to support them at this time."

Tesco's sales have been on the way up after a torrid few years for the chain in which its dominant market share came under serious pressure from discounters and investment by rivals.

An accounting scandal remains subject to criminal and regulatory proceedings.

Its current group chief executive Dave Lewis, who took over after Philip Clarke was ousted in 2014, has moved to bolster its core UK supermarket offering and improve the customer experience.

Mr Lewis has also offloaded a number of fringe businesses to re-invest in the supermarkets, bolstered by a cost-saving drive which included cutting thousands of head office roles.