Woes in the UK could last for a while

THERE is a sense of fin de siècle surrounding Tesco these days. Sir Terry Leahy, who first joined the supermarket giant in 1979, has left the building, with a clutch of his key lieutenants in tow. Sales at existing stores, which have risen inexorably in recent years, are flagging. Its market share, once a source of great concern for the chattering classes, has slipped.

It would be wrong to lay the blame at the feet of Leahy’s successor Philip Clarke, who has been in post for a matter of months. Although there has been much hubbub about its ceding British market share over the last year despite a costly price war, the truth is its slice of the pie has been shrinking for some time.

In the year to the end of November 2007, its share of the UK grocery market was 31.2 per cent. By 2010, that had slipped to 30.7 per cent. Earlier this week, data from Kantar, showed it had shrunk a further 20 basis points to 30.5 per cent, effectively putting it back at 2006 levels.

These fractional changes might not sound like much, but convert them into lost sales and you get a different story. The UK grocery market was worth around £103bn in the year to the end of November. If Tesco had held its market share at 2010 levels, it would have booked an extra £206m in UK sales. If it had held it at 2007 levels, it would have added an extra £722m to the top line.

The lesson from Wal-Mart, arguably Tesco’s closest US equivalent, is that once sales and market share start to slip, it takes some time to turn things around. Wal-Mart suffered two years of falling sales in its domestic market before registering growth at the start of last month.

Hopefully Tesco shareholders won’t have to wait for quite so long. david.crow@cityam.com