Tesco in trouble as sales slump

Tesco’s like-for-like sales fell 3.7% in the last quarter. CEO Philip Clarke admitted that he had never seen such poor trading in his 40 years at the company. He insisted that the £1bn investment programme was working, but he wouldn’t promise any improvement in the next few quarters.

The latest market share figures, produced by Kantar Worldpanel, underlined Tesco’s woes. Its market share slid by 1.5% in the past three months, the biggest fall since records began in 1994.

What the commentators said

Clarke is facing a tougher market than his predecessor, Sir Terry Leahy, said The Daily Telegraph. The supermarket sector “has matured” now that there is no postcode without an outlet. In an industry that has gone “ex-growth”, the trick is to stand out from the competition.

Discounters Aldi and Lidl on the one hand, and upmarket Waitrose on the other, are growing “because they have established clear identities at both ends of the pricing structure”. Tesco has fallen into the gulf in the middle.

That may be why it has been so “timid” in the price war, noted The Motley Fool. Price cuts worth £200m are hardly impressive compared to, say, Morrisons’ £1bn, especially considering Tesco’s larger size. “Analysts and major shareholders have been queuing up to call for Tesco to make bolder cuts.”

Investors are becoming concerned with Clarke’s apparent lack of vision, said Jonathan Guthrie in the FT. He waited almost three years to close the struggling US business, when he should have done it on his first day. Amid this sense of drift, Clarke’s latest managerial moves do little to foster confidence, said Ruth Sunderland in the Daily Mail.

He’s appointed a chief customer officer and a chief creative officer and talked about Tesco being on ‘“a journey” – “corporate speak for ‘in a mess’”. Such jargon “is ugly, and indicates hollow thinking”.

Merryn

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