Company in the news: Tesco

Tesco invested heavily in building giant out-of-town supermarkets. But with profits continuing to disappoint, will the strategy come to haunt the supermarket chain? Phil Oakley reports.

Supermarket giant Tesco's (LSE: TSCO) first-quarter trading update was very disappointing. Despite throwing lots of money at its British business, like-for-like sales (that is, sales adjusted for new space) fell by 1%. This makes the recent uptick in Christmas sales look like it might have been a blip. Tesco is clearly struggling to win back customers who have gone elsewhere.

The main problem in Britain is weak sales of non-food items. This could become a very big headache for the company. Tesco built lots of massive hypermarkets on out-of-town retail parks, designed to sell clothes and gadgets on a pile-'em-high, sell-'em-cheap' basis. But these now look totally unsuited to current shopping habits. Cash-strapped consumers are avoiding buying things they don't need with money they haven't got.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.

 

After graduating with a MSc in International Banking, Economics & Finance from Liverpool Business School in 1996, Phil went to work for BWD Rensburg, a Liverpool based investment manager. In 2001, he joined ABN AMRO as a transport analyst. After a brief spell as a food retail analyst, he spent five years with ABN's very successful UK Smaller Companies team where he covered engineering, transport and support services stocks.

 

In 2007, Phil joined Halbis Capital Management as a European equities analyst. He began writing for MoneyWeek in 2010.