Every little doesn’t help the Tesco backlash

Squeezed by luxury M&S and price-aware Asda, the supermarket will post its worst quarterly trading figures for two decades

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The Independent Online

It has long been a central part of the lives of millions throughout the land. The seemingly all-conquering supermarket chain even spawned a new word, “Tescopoly”, among campaigners who blamed it for all manner of ills from devastating traditional high streets to fostering animal cruelty.

While, as market leader, it became the “whipping boy” for such issues, a great swathe of the British public remained loyal.

However, on Wednesday, Tesco is expected to announce its worst quarterly trading figures for nearly two decades. Analysts are predicting it will post a 4 per cent decline in first-quarter sales at stores open for longer than a year.

A Tesco insider admitted that some people had become “bored and tired” with what it has to offer. And the company has come under sustained assault on two fronts with Asda, Aldi and Lidl attacking on price, while Waitrose and Marks & Spencer entice customers in search of greater luxury. Tesco’s market share has slipped from a peak of 31.8 to 28.7 per cent.

Clive Black, an industry analyst at Shore Capital, said he had “never been so gloomy about Tesco’s prospects in 20 years”.

“We believe Tesco UK is increasingly perceived by customers as simply too expensive versus the limited-assortment discounters, Asda and potentially Morrisons, given the latter’s recent moves on price,” he said. “That is a dangerous and frankly untenable place for a mass-market leader to be.”

Mr Black’s views come despite the store’s heavy price-cutting operation with £200m invested in lowering prices on everyday goods such as chicken, milk, tomatoes and cucumbers, and some rave reviews for its “Finest” range.

Company sources said they were aware that “people’s purses have been squeezed”, and insisted that  they had a clear strategy to win customers back.

Some 600 stores will be refurbished this year, with some turned into “retail destinations” where shoppers can also have coffee or a meal and buy clothes.

Vince Bamford, of trade paper The Grocer, said there had been “a backlash against Tesco because it has become so ubiquitous ... It has been seen as the whipping boy for the ills of the entire grocery market.”

“I still think it has got some work to do to get rid of that image and I do think it is an unfair image. They are a large retailer like Sainsbury’s, Morrisons or Asda, and speaking to suppliers, they are no better or worse to deal with than any other one.”

Mr Bamford said the supermarket’s efforts to attract high-spending customers could pay dividends, saying there had been an “incredible improvement” in its Finest range. Tesco won 22 out of 74 awards at The Grocer’s own-label awards in 2013.

“Quite a few comments [from the judges] were the Finest range would rival M&S goods,” he said.

James Anstead, a Barclays analyst, said: “The market will likely want to see hard evidence of Tesco’s turnaround gaining traction before buying into the story with conviction.”

* A Tesco spokeswoman said: “We have a clear strategy and work continues to improve the quality, range and service we offer our customers.  We’ve made a significant investment in permanently reducing the prices of the products that matter most to customers and our Clubcard Fuel Save scheme has already helped a quarter of UK households with cars reduce the cost of filling their tanks.

“The response to our refurbished stores has been fantastic, and we’re accelerating that programme so that within three years every Tesco store in the UK will offer a better shopping experience.”