BELEAGUERED Tesco boss Philip Clarke has declared he isn’t going anywhere. Unfortunately, on his watch, neither is the nation’s favourite supermarket. After twenty years of rising profits for the group, this is the second year in a row where they have fallen. Pre-tax profits were down 6.9 per cent: 7.7 per cent in constant exchange rates. One clear message emerges. Someone has to take care of business at home.
The writedown of £801m and £540m of European and Chinese assets respectively shows how challenging overseas initiatives have proven. The Eurozone’s economic malaise and the recent stumbling of the Bric economies has taken the shine off two more key markets. In the wake of the failure of the Fresh & Easy adventure in the US, it leaves little option but to turn homeward.
And Tesco’s core business is still British. European and Asian sales last year combined were less than half the £48bn it took in UK sales. Tesco’s dominance of the sector has fallen, but it retains a 28.6 per cent market share here, far ahead of its nearest rival Asda, at 17.4 per cent on this year’s most recent figures.
Tesco’s UK footprint is big enough for it to recover. But not like this. Like-for-like UK sales not only fell in the third and fourth quarters, they leapt from 1.5 per cent to a 3 per cent decline, excluding VAT and petrol.
Some of the answers are straightforward. Dramatic, clear action to lower UK prices. A quicker, cheaper facelift for the older stores. Refocusing the brand message. Above all, avoiding overseas distractions.