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Tesco may sell Giraffe chain in step away from failed turnaround plan

Published 01/04/2016

Tesco may be planning to offload the Giraffe chain
Tesco may be planning to offload the Giraffe chain

Supermarket giant Tesco may sell its restaurant chain Giraffe in a step away from the failed turnaround strategy launched by ex-boss Philip Clarke.

Britain's biggest supermarket has been drumming up interest in the family-friendly chain by sounding out private equity firms and potential buyers, according to reports.

Giraffe - which has 58 sites across the UK - was snapped up by Mr Clarke in a £50 million deal three years ago. It formed the crux of his master plan to boost footfall in larger supermarkets by opening restaurants and cafes in store.

But new chief executive Dave Lewis is said to be considering a sale of the restaurant group in order to focus on Tesco's core business, Sky News reported.

Shares in Tesco fell more than 2%.

Mr Clarke took over from Sir Terry Leahy in March 2011, but shocked the market at the start of 2012 when he announced Tesco's first profit warning for 20 years.

It prompted the roll-out of a £1 billion turnaround strategy, which included a swathe of price cuts, the recruitment of more staff and upgrading stores with bakeries, Harris + Hoole coffee shops and Giraffe restaurants.

However, Mr Clarke stepped down after making further profit warnings and seeing sales come under pressure from German discounters Aldi and Lidl and the supermarket price war.

Since then, Tesco has moved to cut costs, with Mr Lewis shutting dozens of unprofitable stores, shelving plans to open new supermarkets, shutting its final salary pension scheme and disposing of the loss-making digital content business Blinkbox.

Tesco was buoyed by a surprise rise in sales over the festive season, with a 1.3% increase in UK like-for-like sales in the six weeks to January 9.

Speculation surrounding the sale of Giraffe comes after close rival Sainsbury's won its four-month battle to buy Argos owner Home Retail Group after agreeing a £1.4 billion deal, and it will now set about revamping the general goods retailer.

Sainsbury's said the move will create a "multi-product, multi-channel" business with around 2,000 stores, concessions and click-and-collect outlets.

A spokesman for Tesco declined to comment.

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