Tesco's liquidity improved with South Korean unit sale, says CEO

Tesco's liquidity profile has improved following the £4bn sale of the supermarket leader's South Korean unit, according to chief executive Dave Lewis.

Speaking on the sidelines of the Confederation of British Industry's annual conference in London, Lewis said, "We expect to see Tesco's performance improve further over the coming months. The sale of the South Korean business [in September] was part of a wider strategic move. We are resetting and rebuilding."

Lewis, who was appointed as chief executive in wake of an accounting scandal at the FTSE 100 group, said Tesco was reforming its business model in tandem with its culture and is having to take some difficult decisions.

"The old way of doing things inflicted damage on our business and we are attempting to move on. We're taking stock, consulting with our stakeholders, and turning our business around."

Unfortunately, that has also resulted in a difficult decision to close some Tesco stores, "because there wasn’t any way of making them profitable," he added.

Earlier, Lewis told CBI delegates the closures were in line with similar moves by the company's major competitors.

The Tesco chief executive also said the market was witnessing a period of high food price deflation, which while positive for consumers, presented immense challenges for the groceries market.

"Supermarket profits have shrunk from 5% to 2% on average and we face some significant structural and cost changes going forward. Independent retailers face similar challenges. The retail sector as a whole remains under immense pressure."

Lewis also criticised the UK government's stance on business rates. "As a company which has stores in practically every postcode in the UK, we are deeply impacted by high business rates that cloud over making business decisions in a tough operating climate.

"UK business rates are three times higher than the OECD average. For every pound we pay in corporation tax, an equivalent £2.30 is paid by us towards business rates. While I understand the government's desire to raise revenue, this is a very troubling scenario."

Lewis said Tesco took a "balanced view" on the subject of the living wage.

"We’d like a broader conversation about the living wage, not just narrow it down to an hourly rate issue. Tesco offers colleagues benefits alongside their wages. Going forward we are open-minded on the subject of the living wage, including proposals for colleagues who wish to monetise those benefits towards increasing their wages."

At 1627 GMT, Tesco's share price was down 2.32% at 178.65p.