Jim Armitage: Tesco's much-needed prune isn't a cause for panic


By his dry standards, Sir Terry Leahy was dewy-eyed with hope and optimism back in 2006 when he declared war on the US grocery market. "This is a tremendously exciting move for Tesco which will add a new leg to our international expansion," he proclaimed.

"The US is the largest economy in the world, with strong forecast growth and a sophisticated retail market." Tesco had, he said, researched the American shopper for many years before taking the plunge.

Sadly for his replacement, Philip Clarke, the research was duff. The team not up to the job, the strategy fatally flawed.

Americans already had highly sophisticated grocery stores in the areas Fresh & Easy was trying to get a foothold – what did Tesco think Wal-Mart had been doing for the past 50 years? From the very start, Tesco's shops weren't big enough to get the economies of scale needed, or the ranges of products California shoppers demanded. Americans hated the complexities of the self-service checkout. In the land of unrivalled choice, unidentified items in the bagging area did not go down well. The joke became "Not very fresh and not very easy."

Tim Mason, a talented executive who inexplicably clasped the hospital pass of setting up the US operation, quit with a £1.7m payoff, his hopes of being the next chief executive sunk into the Atlantic.

A revamp was ordered, stores closed or reconfigured, but it was all too late.

It wasn't the only foreign adventure of Sir Terry's to leave Tesco with a nasty bug. Mr Clarke has also been left administering treatment – or should that be amputation? – to other Tesco extremities gone gangrenous. A year ago he announced Japan was for the chop after Tesco had spent a quarter of a billion pounds and eight years trying to crack that market. Now he is diluting the expense of China by merging operations with a local retail giant. That could signal an end to the Tesco brand there.

Increasingly, investors are left doubting Sir Terry's judgment. But, despite the troubles abroad, Tesco is still one of Britain's biggest corporate success stories, and he should take the credit.

Sure, Mr Clarke has work to do getting its overseas laggards to shape up or ship out. He does face difficulties fixing its sales growth in the UK and working out what to do with all those empty out-of-town megastores.

But, before you start believing the inevitable comments about how Tesco has lost its way and is facing defeat by Sainsbury's, pop these facts in your carrier bag: Tesco's non-UK stores still make more money than the whole of Sainsbury's. In Thailand alone it has more stores than there are Sainsbury's in Britain. Sainsbury's made a profit of £756m last year. Tesco made £2bn.

That's not to say Tesco isn't in need of dramatic change to get its growth trajectory back. This deal is part of that process. Mr Clarke is making tough, and mostly right, decisions.

Pro-Russia rebels guard a train containing the bodies of victims of the Malaysia Airlines flight MH 17 crash in Torez, Ukraine
Life and Style
Child's play: letting young people roam outdoors directly contradicts the current climate
lifeHow much independence should children have?
Arts and Entertainment
Tycoons' text: Warren Buffett and Bill Gates both cite John Brookes' 'Business Adventures' as their favourite book
booksFind out why America's richest men are reading John Brookes
Arts and Entertainment
<p>Troubled actor Robert Downey Jr cements his comeback from drug problems by bagging the lead role in Iron Man. Two further films follow</p>
filmRobert Downey Jr named Hollywood's highest paid actor for second year running
Sign here, please: Magna Carta Island
propertyYours for a cool £4m
The Commonwealth flag flies outside Westminster Abbey in central London
Arts and Entertainment
Struggling actors who scrape a living working in repertory theatres should get paid a 'living wage', Sir Ian McKellen has claimed
Skye McCole Bartusiak's mother said she didn't use drink or drugs
peopleActress was known for role in Mel Gibson film The Patriot
Arts and Entertainment
tvWebsite will allow you to watch all 522 shows on-demand
Arts and Entertainment
filmThe Rock to play DC character in superhero film
Arts and Entertainment
Damon Albarn is starting work on a new West End musical
artsStar's 'leftfield experimental opera' is turning mainstream
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
Paul and his father
artsPaul Carter wants to play his own father in the film of his memoirs
Ben Stokes trudges off after his latest batting failure for England as Ishant Sharma celebrates one of his seven wickets
Arts and Entertainment
Members of the public are invited to submit their 'sexcapades' to Russell T Davies' new series Tofu
Sky's Colin Brazier rummages through an MH17 victim's belongings live on air
Arts and Entertainment
Keira Knightley and Benedict Cumberbatch star in the Alan Turing biopic The Imitation Game
arts + ents'The Imitation Game' stars Benedict Cumberbatch and Keira Knightley
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

Training/Learning and Development Coordinator -London

£28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Project Manager - ETRM/CTRM

£70000 - £90000 per annum + Job Satisfaction: Harrington Starr: Project Manage...

Day In a Page

Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn
Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Meet the man who doesn't want to go down in history as the country's last Scottish Secretary
Legoland Windsor's master model-makers reveal the tricks of their trade (including how to stop the kids wrecking your Eiffel Tower)

Meet the people who play with Lego for a living

They are the master builders: Lego's crack team of model-makers, who have just glued down the last of 650,000 bricks as they recreate Paris in Windsor. Susie Mesure goes behind the scenes
The 20 best days out for the summer holidays: From Spitfires to summer ferry sailings

20 best days out for the summer holidays

From summer ferry sailings in Tyne and Wear and adventure days at Bear Grylls Survival Academy to Spitfires at the Imperial War Museum Duxford and bog-snorkelling at the World Alternative Games...
Open-air theatres: If all the world is a stage, then everyone gets in on the act

All the wood’s a stage

Open-air productions are the cue for better box-office receipts, new audiences, more interesting artistic challenges – and a picnic
Rand Paul is a Republican with an eye on the world

Rupert Cornwell: A Republican with an eye on the world

Rand Paul is laying out his presidential stall by taking on his party's disastrous record on foreign policy
Self-preservation society: Pickles are moving from the side of your plate to become the star dish

Self-preservation society

Pickles are moving from the side of your plate to become the star dish
Generation gap opens a career sinkhole

Britons live ever longer, but still society persists in glorifying youth

We are living longer but considered 'past it' younger, the reshuffle suggests. There may be trouble ahead, says DJ Taylor