As BlackRock sells Tesco shares, has the grocer been permanently damaged by recent events?

James McGregor, director of Retail Remedy, says Yes.

Tesco’s admission this week that it had overstated its declining profits by £250m was one hell of a story.

But the accounting cock-up and subsequent dumping of Tesco shares by BlackRock are really only footnotes in the protracted obituary of this once all-conquering retailer.

The hegemonic Tesco of old, the retail giant in whose shadow many of us grew up, has been dead for some time now, its empire overstretched and its business model ossified.

But just because the business model that made Tesco great is dead, it doesn’t mean that Tesco as a grocer is dead.

Rather, it is at a crossroads.

Its real challenge is far bigger than finding out how it got its numbers so dreadfully wrong (although clearly that is important): it’s how to react to the changing retail landscape defined by digital shoppers, the death of the hypermarket, and its search for an identity in the no-man’s land between the hard discounters and upmarket grocers.

As yet, it has no answers.

Neil Saunders, managing director at Conlumino, says No.

It’s been a dreadful week for Tesco, with the company taking more of a battering than the fish in its freezer cabinets over the issue of accounting irregularities. And this comes on top of the existing trading problems.

The impression is of a firm in disarray.

There are questions around whether the company’s structure is fit for purpose, and whether the board is up to the job.

These questions need to be addressed, but the firm’s decline is not inevitable.

Tesco needs skilled, competent and experienced hands to guide it. Getting this right is chief executive Dave Lewis’s first task.

With good people, Tesco can recover. It’s unlikely to retain the dominance it’s long enjoyed (the market is too competitive), but it can grow again.

As the French supermarket Carrefour has shown, by focusing on the basics (prices, service, efficiency), even behemoths can be turned around.

Change will take time, and there will be more pain, but Tesco remains a force to be reckoned with.

Related articles