Tesco said it would charge pounds 30m against its 1994 profits for the refits, together with advertising to support the store conversions, redundancy costs and the write-off of assets. Most of the 320 employees at Low's head office in Dundee are likely to go, although the date of closure has not been decided. The directors have already left.
Tesco will spend a further pounds 35m over the next two years developing the Low stores, refurbishing them and bringing them up to Tesco standards. David Malpas, Tesco's managing director, said there were no plans to close stores.
Tesco was forced to increase its bid for Low by nearly 60 per cent after its original pounds 154m offer was trumped by Sainsbury. The group said, however, that it still expected significant benefits from the deal by cost savings and improved buying. Prices at Low's stores will be cut 5-6 per cent.
'We were hoping we were right in assuming we could put in lower selling prices and still get a higher gross margin than Low,' Mr Malpas said. 'We are there to within 0.1 of a percentage point or so.'
His comments came as Tesco announced an 8.1 per cent rise in pre-tax profits to pounds 250.2m for the 24 weeks to 13 August, on sales 17.3 per cent ahead at pounds 4.69bn.
A rise in the tax charge held the increase in earnings per share to 0.4 per cent, to 8.46p, but the dividend was increased 10.2 per cent to 2.7p. The results were at the top end of City expectations, but the shares eased 3p to 248p in a falling market.
The results showed some scars from the supermarket price wars, with margins dropping from 6.1 to 6 per cent, largely because of a similar fall in gross margin as prices were cut. That is, however, an improvement on the second half of last year when the gross margin dropped 0.7 percentage points.
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