Tesco suffered a 16% drop in sales over the Xmas period. Why that should come as a surprise in a recession beats me but the stock market knocked £5 billion off the share value despite Tesco still making almost £4billion profit. Seems it just wasn’t enough.
The new CEO of Tesco, Phil Clarke, who pockets almost £7 million a year has promised to make changes.
He has blamed his predecessor, retail god Sir Terry Leahy, indirectly and says they became too focused on price. The Big Price Drop campaign suffered a bit of a backlash from customers who realised that Tesco was robbing Peter, in this case their double points, to pay for Paul.
If things hadn’t been so tough maybe we wouldn’t have noticed. But it’s now common practice to hike up prices before dropping them again, not always back to where they were, and claiming price cuts.
Analysts say Tesco needs to focus on its range, quality, and service. It slashed wage bills to boost profits and to finance foreign expansion. Did you know there are 200 Tesco stores in Hungary? But they are struggling in the USA.
It was obvious that there weren’t enough staff when you saw the queues and the closed checkouts at peak times. In my local Tesco Extra I’ve asked many times for them to open extra checkouts but the management say they don’t have enough staff (who seem to work office hours). They close the “fewer than 10 items” tills and try to get you to use the self-service machines with all the hassle that entails not to mention threatening more jobs.
And then there are some ethical issues. This weekend Carole Cadwalladr in the Observer mentioned the whales and dolphin snacks sold in Japan and reminded us of the pig farmers who ended up subsidising the stores. And do customers realise that it’s the suppliers who take the hit for the BOGOF offers not the supermarkets?
And what about the Chief Operating Office who conveniently sold some of his shares just before the share price dropped? Are we really to believe he didn’t have a clue about the profits warning? And if he didn’t shouldn’t he have seen the figures as part of his job? (NB Since moved from his job).
So Tesco are promising to improve customer service and employ more staff. The CEO has also poured cold water on further megastore expansion as non-food items are increasingly being bought on-line.
That will be good news for rivals and perhaps smaller shops as Tesco has aggressively pursued store expansion in the past but can we learn to love Tesco again?