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Tesconomics

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RolloTheRed

RolloTheRed Report 3 Oct 2013 08:33

See what happens when your fall off your trolley!

http://www.theguardian.com/business/2013/oct/02/tescos-profits-crash

JustJohn

JustJohn Report 3 Oct 2013 09:16

I remember when I worked for Tesco back in 1978 that profits plummeted (not in my stores, but it was a very difficult time). Tesco employed 25,000 staff in those days (all in UK) and had ditched Green Shield stamps in 1977 (to coincide with Silver Jubilee). Sales were buoyant, but costs were uncontrolled. Profits had grown strongly since the war every year, but in 1978 they dropped back from something like £22m previous year to £18m. It was a strong rumour that KwikSave (the most successful discounter then) would mount a hostile takeover of Tesco.

Now Tesco employ 537,000 world wide and make between £3bn and £4bn annual profit. £3,000m profit compared to £18m 35 years ago!!!!!

Yes, they seem to be struggling for sales and profits in a number of countries. And yet again, we have similar circumstances in UK to what was happening in late 70's.

Retrenchment of wages for most (labour disputes, pay freezes, high unemployment, 3 day week effects still being felt). Growth of modern discounters like Kwiksave who threw everything out in boxes, based everything round a big computer in Prestatyn, and had limited range, very little fresh food. And the upmarket shops (Sainbury, Waitrose, MacMarkets and Oakeshotts) were doing comparitively well compared to those who were considered supermarket companies then - Tesco, Fine Fare, International, Co-op Retail Services, Safeway. The wealthier have always been fairly immune and can shop where they want.

So an interesting time for the current mainstreamers - Tesco, Sainsbury, Morrisons, Asda. Tesco shares dropped 5% yesterday on the bad news, but later recovered. See what shareholders and customers think today %3A-%29

Silly Sausage

Silly Sausage Report 3 Oct 2013 09:34

The world has changed since then, back in 1977 most people still shopped daily, super markets didnt need massive carparks because not all families had 1 car let alone 2, most people shopped for what they needed that day or at the most 2 days. Some would buy their tins goods from Kwiksave meat from Tesco and than cheese from BHS. If your tesco's or kwiksave was a bus ride away you'd still use your local shops. Obviously work was done and presentation became an issue, no longer did a mountain of baked beans looked so appealing because they had a penny off that week. The layout of shops changed like the lightling, flooring so on. Introduced household products, soft furnings, and a clothes range for all the family. So it began you'd nip in for a loaf of bread and spend 2 hours and £50.00

%3A-D

JustJohn

JustJohn Report 3 Oct 2013 09:46

I think the statistic that will worry Phil Clarke and his team at Tesco most is a drop in like-for-like sales in the UK of 0.5%. Doesn't sound much, but that is a key indicator of the underlying business. Particularly when Sainsbury have increased by 2% over same period.

I am happy that Tesco have a foothold in some difficult world markets. Not many large British companies have the guts to go into places like India and China, which are huge markets but very difficult ones.

And I am happy that last two CEO's were Scousers - Leahy and Clarke. Ordinary backgrounds, men with feet firmly grounded, men who will see opportunities and give it their best shot. I will keep my few Tesco shares for time being %3A-%29 And I think all our private pension funds will be ok.

JustJohn

JustJohn Report 3 Oct 2013 09:59

Hayley. Retailing was so very different back then. %3A-%29 You remember it well. Sainsbury's were determined to hang on to their image of NOT being in supermarkets. I remember when Budgens bought some shops off Sainsbury's in about 1992 that they were like a lesson in history. One shop in Oxted in Surrey still had the most wonderful mosaic tiles on the floor and superb wooden counters.

JS may have been late into supermarkets, but what a good job they are doing at present. Sainsbury family very quiet these days about their opposition to supermarket-style retailing %3B-%29

RolloTheRed

RolloTheRed Report 3 Oct 2013 10:34

There used to be a pleasant grocer called Greggs ( not the pasty n pie people ) which Sainsbury took over and expunged despite promises to the contrary.

Except for Aldi, Waitrose & Morrisons I find them all utter purgatory to be in.

Tesco will go on losing market share while the stores are for the most part a badly maintained mess with no look n' feel appeal to upmarket shoppers and prices not appealing to those on a tight budget. Oddly enough both groups are deserting to Aldi.

Sainsbury prices are maybe what drove Milliband to dream up "cost of living" as the new party leitmotif. Their service is also very, very slow. Their car parks are full of suspension busting bumps ( is that why half the car park are 4WD ? )

Asda ? This Wallmart implant should be done over by "Fake Britain".

The grocery pulse of Britain is probably located somewhere near Hemel Hempstead not Huyton. I doubt if Lancashire lads will be able to work out what needs to be done.

Silly Sausage

Silly Sausage Report 3 Oct 2013 10:55

I worked for Liptons John %3A-D I liked the smaller shop in the village it was like a mini shop/soap opera....but didnt like working for the bigger store, still all food but it had a young upwardly mobile manager who a younger deputy what a pair of t****rs both had the people skils of a gnat I detested them equally %3A-%7C

JustJohn

JustJohn Report 3 Oct 2013 10:58

Now that really was twaddle, Rollo.

Half a percentage fall in your like-for-like sales is something that is a challenge for a supermarket company, not a tragedy. Two per cent increase for JS is very good on the current market.

Everybody has shops they like - I favour Lidl (for strange food) , Morrisons (for fish and fruit) and Tesco for normal shopping. And I try and use local shops if I can. The local JS in Pontypridd is brilliant - but it is brand new and still sparkling.

Leahy followed Lord MacLaurin and his right hand man David Malpas. He did a fantastic job - to follow those two was like following Sir Alex at Old Trafford.

Philip Clarke has an even bigger challenge to follow Terry Leahy. But I knew him when he was a young man (mid 20's) and was store director of Weston Favell near Northampton. He was a brilliant operator then, has had a stellar career since and still remains a modest and pleasant scouser with a nice sense of humour and fun. He will prove every septic wrong %3A-%29 %3A-%29

JustJohn

JustJohn Report 3 Oct 2013 11:21

Hayley. Had forgotten Liptons. Lovely shop - there was one in Wolverhampton about time you would have started. Also Home & Colonial were good.

When we went up to Colwyn Bay in 1950's, there was John Irwin and Sons. Quite posh. My grandma used to say "that Marks and Spencers in Llandudno is just a bazaar, no respectable person would buy their clothes there". She thought Irwins was "bees knees" - lovley decor, lovely staff" . Yet in 1964 Irwins succombed to a takeover from rough and ready Tesco - an old Tesco boss of mine was Irwins store manager at Rainhill in Liverpool. He saw the writing on the wall and really got behind self service, worked incredibly hard for Tesco and became a retail director responsible for about 40 small supermarkets and self-service shops in Liverpool and South Lancs.

The best retailers tend to come from the working areas of Liverpool and south and east London, Rollo. Don't ask me why - it just seems to happen.

RolloTheRed

RolloTheRed Report 3 Oct 2013 11:39

Possibly at some point Tesco and even JS may demerge if the objective is to maximise shareholder value. It worked very well for Cadbury/Schweppes.

There is an optimal size for any business and Tesco seem to have grown well beyond it losing vast sums in overseas markets ( especially the USA ) which will never be recovered. Current attempts to revamp the UK stores and add such novelties as Giraffe and trolley scanners are too little too slow.

Morrisons and Aldi have got their number. JS have locked up the crinkly wrinkley market.

As I recall it was Leahy who was the driving force behind Fresh'n Easy.

OneFootInTheGrave

OneFootInTheGrave Report 3 Oct 2013 12:05

Tesco, Sainsbury, Waitrose. Asda, Morrison's and others - with all their advertising, artificial decorations, price promises, and promotions, will never replace the quality and service that you got when you were able to shop for all your food on your local High Street.

I can remember shopping in our local High Street, Liptons before it became Presto, William Low (a brand swallowed up by Tesco), Woolworth with its food counters, plus local bakers, butchers, greengrocers, and fishmongers.

Renes

Renes Report 3 Oct 2013 14:54

I think this makes interesting reading

Is this the pot calling the kettle grimy ....,l

http://www.nothankstesco.co.uk/news-updates/sir-terry-wants-the-heart-put-back-in-our-high-streets/

JustJohn

JustJohn Report 3 Oct 2013 21:10

Sir Terry Leahy has trodden on a few toes in his career. and I suspect your blogger was one of them, Renes %3A-%29 %3B-%29

It does look as if these foreign markets are causing problems currently, but at least Tesco have been willing to place themselves in many countries. And sometimes you catch a cold wen you speculate to accumulate - that is the name of the game. But if Sir Terry accepts he scored an own goal with American operation, he has scored many goals. And 8-1 would be quite a good victory in a soccer match %3B-%29 I think Tim Mason (never a "retailer") was the Director of Fresh'N'Easy in US, and he left with a good package soon after new CEO took over.

Looked at brokers today, most seem to say "buy" Tesco. Underlying business looks extremely strong. Next quarter will show whether JS or Tesco has got it right.