Six Reasons Why Supermarket Giant Tesco May Be ‘Finished’

Internationally, the supermarket giant recorded a 2.2% fall in like-for-like sales, including VAT and excluding petrol. Within those figures, sales fell 1% across Tesco’s European operations and 3.2% in Asia.

This comes after Tesco, which accounts for 29% of Britain’s supermarket trade, revealed in April that its profits had fallen for the second year in a row.

The supermarket giant’s chief executive Philip Clarke is under mounting pressure to improve the situation. With Tesco’s share price down 20% in a year, Clarke will have to battle to keep shareholders’ confidence. Meanwhile, experts have pronounced gloomy verdicts about the trading performance of the UK’s biggest retailer.

Clive Black, head of research at Shore Capital, said that Tesco’s strategy in Britain “simply does not seem to be working”, while Bernstein Research’s Bruno Monteyne told Radio 4 this morning: “We thought three months ago that the figures couldn’t get any worse. And here we are three months later.”

“Big supermarkets are finished,” he concluded.

As Clarke rushes to turn around Tesco’s flagging fortunes, HuffPost UK found six reasons why the task may be rather difficult.

• 1
  Tesco can’t shrug off its poor performance
  
  Clarke blamed the dip in sales on cutting prices, moving away from vouchers and the disruption from refurbishing a large number of stores. However, Bernstein Research’s Bruno Monteyne estimates that if you took out such costs, their like-for-like sales would still have dipped by 2%.
• 2
  Tesco is trying too hard to appeal to everyone
  
  Discount retailers like Asda specialise in offering good deals, while fancy supermarkets like Waitrose are without equal at providing luxury. So Tesco is trying to be a mix of everything, other customers are lured away by more specialised rivals.
• 3
  Others are doing what Tesco is trying, but better
  
  Tesco “has been increasing prices way too fast over the last few years to keep up earnings growth,” Monteyne points out. As a result, compared to discount retailers like Asda, Tesco is at least 4% more expensive for shoppers.
• 4
  1 million fewer customers are visiting a week
  
  The proof that Tesco is having some issues comes in the footfall, as the chain seems to have lost more than 1 million customer visits a week, worth £25 million in sales.
• 5
  Tesco has never done this badly
  
  Clarke, who has worked for 40 years at Tesco, admitted: “I have never seen a quarter’s like-for-like sales like this before, that I can remember.” Monteyne told Radio 5 Live the results were “the worst in their history.”
• 6
  Even Tesco’s boss isn’t confident
  
  “I see every day the improvements that are coming in the business, but I’m not making any promises about sales improving in the next few quarters,” Clarke warned today.  Meanwhile, other analysts like Julie Palmer at Begbies Traynor think Clarke “doesn’t seem to have a clear turnaround strategy”. He’ll have to work hard to prove them wrong.

Sourced from thehuffingtonpost.com