Tesco, Sainsbury Cut Thousands of Roles as Retail Costs Rise

(Bloomberg) -- Tesco Plc and J Sainsbury Plc, the U.K.’s biggest grocers, are cutting thousands of management positions as intense competition and wage increases heap more pressure on Britain’s beleaguered retailers.

Sainsbury is cutting management roles across its convenience stores and supermarkets, the London-based retailer said in a statement Tuesday. That followed an announcement Monday from larger rival Tesco, which is scrapping 1,700 management jobs at large stores and distribution centers. The U.K.’s biggest grocer said it is creating 900 roles with broader responsibilities.

Sainsbury’s restructuring will “deliver cost savings to be invested in our customer offer,” Simon Roberts, the company’s retail and operations director, said in the statement. The employees affected can reapply for one of fewer newly created management roles, with unsuccessful applicants demoted or laid off. Sainsbury declined to specify how many job losses it expects, but the reductions will affect positions across its network of more than 1,400 stores.

The two grocers are taking similar steps to deal with cost pressure stemming from a rise in the minimum wage and the pound’s decline following the Brexit vote. Britons are shopping more on Amazon.com Inc. and other online retailers, while discounters Aldi and Lidl are gaining market share and preventing the likes of Tesco and Sainsbury from raising prices more aggressively.

The job cuts are necessary for the grocers to rebuild their profits, while narrowing the price gap between themselves and the discounters, Shore Capital analyst Clive Black said by email. In last year’s annual report, Tesco said it employed 464,520 workers, down by more than 40,000 since Chief Executive Officer Dave Lewis took the helm in 2014.

Tesco’s shares rose 1.3 percent on Tuesday in London, while Sainsbury’s were unchanged.

Tesco said in October that it had cut operating costs by 485 million pounds ($677 million) on an annual basis, aiming to reduce them by a total of 1.5 billion pounds by 2020. Sainsbury expects to cut costs by 185 million pounds in its current financial year, and is seeking a further 500 million pounds in reductions over the next three years.

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