Tesco’s needs to get a grip – before a ‘difficult result’ becomes a disaster
Outlook “Well obviously it was a difficult result. But I’ve accelerated my new plan for the side. It will deliver results. And just look at the performance of our left midfielder. Pretty good I think you’ll agree.”
Can you imagine the reaction of the tabloids to England manager Roy Hodgson saying that in the wake of his team suffering a 4-1 battering?
That's basically what we're hearing from Tesco today. In its case the four is a per cent. Tesco sales from stores open at least a year fell by that amount (well near enough, the actual figure was 3.7 per cent) in the first quarter of its financial year.
As for our miracle left midfielder, well in Tesco’s case he’s represented by eggs, milk, and bread. Sales of those staple items went, well, bananas surging by 28 per cent after prices were slashed. Pretty good, I think you’ll agree, is what Mr Clarke seemed to be saying in the grocer’s interim management statement.
You can see what he’s thinking. Take the shears to the price of these staples and the customers will come flocking back. Some people clearly did. But they bought other essentials elsewhere. Mr Clarke talked about customer loyalty. That’s a luxury most customers can’t afford in austerity Britain.
It’s true that the overall sales figure represents revenue; cash through the tills rather than volumes of actual product. If you cut prices, revenue will fall. If Tesco can just maintain volumes and holds its prices (it’ll have to do at least that while the current price war rages) next year’s first quarter figures may look a little better.
And they may not. Figures such as 1m shoppers a week turning their noses up at Tesco should worry shareholders. Under pressure chief executive Philip Clarke talked about accelerating his plans to revive the group. His investors may care to ask why he wasn’t going at full speed when the company’s problems became clear.
It is, of course, true that Tesco is still a huge business that makes pots of money. But its reputation is fast fraying.
As a business it’s starting to look eerily like M&S, which has been doing well with food but not much else. M&S is another big name with a big brand that has been struggling to find its place in the current retail landscape and keeps taking one step forward, two steps back.
But unlike M&S - which could still conceivably succumb to a bid if things don't pick up - Tesco is probably a bit too big to fall to a predator.
So it's down to the management to sort this one out. Right now, they’re failing.
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