This week’s news that Tesco is closing more than 40 stores and mothballing plans for around 50 new ones, plus other cost-cutting measures, has re-ignited speculation about the future of Dobbies Garden Centres.
Dobbies has been in Tesco’s ownership since 2007, following an ill-humoured takeover spat with Sir Tom Hunter, who reluctantly surrendered his 28 per cent stake. Tesco ending up paying £156 million – a drop in the ocean for a group whose 1500 UK stores were bringing in more than £35 billion. Clearly, in the pre-recession spending boom, Tesco had their eye on a garden industry that promised gold at the end of the rainbow.
At that point, there were just 21 Dobbies centres, but in 2010, the then CEO James Barnes trumpeted plans to create a truly national chain with 100 stores by the end of the current decade.
On Barnes’s watch, the portfolio steadily expanded – but today, with Barnes gone and just five years of the decade to go, there are still only 35 centres, leaving that target of 100 seemingly woefully irrelevant in the light of Tesco’s current troubles.
Rubbing the crystal ball reveals only cloudiness…but we can speculate!
It’s unthinkable that, while engineering this week’s cuts, Tesco will not have reviewed the return on their Dobbies investment. The last figures we have, for the year ending February 2013, show a profit of £7.3 million on turnover of £137.4 million, a 30 per cent hit to the bottom line after a weather-hit year. In Tesco terms, the sums are trifling – and selling Dobbies would not be regarded as much of a windfall. But if what Tesco CEO Dave Lewis – ‘Drastic Dave’, as he was known during his Unilever days – is aiming for is a four-square focus on the core business and the need, as he sees it, to get Tesco price competitive again, he may regard continuing ownership of a chain of garden centres as a distraction his team can do without. 
However, the garden centre industry is currently riding on a crest of good form, and Lewis may be viewing Dobbies as a sleeper he can waken when the investment climate improves – as long as it continues to ‘run itself’ and return a profit in the meantime. Then, of course, there is the question of all that valuable real estate (with retail planning permission).
Hang on a minute, though. He’s drafting in Matt Davies, chief executive of Halfords, to run Tesco’s UK business. At his old company, Davies was hot on the idea of improving the customer experience – a philosophy he would certainly want Dobbies CE Andy King and his team to employ to good effect. He might see a chink of an opportunity there to upscale the business…
Yet, would it be enough to satisfy Drastic Dave?
As one garden industry professional I spoke to this week said: “I don’t know whether the newly-managed Dobbies with its closer connection to Tesco stores is profitable or not. All I can say is that given that the fundamental reasons for Tesco getting into the gardening business in the first place haven’t changed– the grey pound, the size and relative robustness of the garden market and so on – then whether they divest or not comes down to whether the sale would release enough funds to meet their needs and make make it worth pursuing.”
