What happened to Tesco's mojo?

A Tesco store in Holyhead, Anglesey

Has Tesco lost its mojo? Its results for the first quarter of the year are not strong, and yet the first few lines of its press release try to imply that they are, which is not the sign of a confident business.

For example, Tesco starts its press release by saying that "customer perceptions" have improved "on all key measures" - which may well be so, but is not the same thing as money in the till.

It goes on to say that there were "positive and improving" like-for-like or underlying sales "in all food categories with the exception of frozen and chilled".

For the leading retailer of frozen and chilled food, that is a bit like saying my team Arsenal is brilliant in midfield, and ignoring some conspicuous shortcomings in defence and attack

The point is that, in the round, Tesco's like-for-like sales in the UK were down between 0.8% and 1.6% in the three months to May 26, depending on which of the four measures of underlying sales provided by Tesco you may think is relevant.

A food inspector checks the origin of meat in France The memory of Europe's horsemeat scandal lingers

For what it's worth. Tesco seems to think that the 1% drop, excluding VAT and petrol, is the one that is relevant. That compares with a 0.5% rise in the final quarter of the last financial year.

So Tesco seems to have gone backwards again, in spite of the £1bn it spent in 2012/13 on recruiting 8,000 new store staff, relaunching thousands of own-label products and "refreshing" the look and feel of its stores.

The chief executive of Tesco, Philip Clarke, gave two explanations on the Today Programme for what had gone wrong.

Sales of consumer electronics were poor. Historically these have been important to Tesco but Mr Clarke has decided that Tesco will significantly reduce its presence in this market (you can probably hear Dixons breathing a huge sigh of relief).

And although no new bits of horse have been found in Tesco's ready meals in the latest period, the memory of equine DNA in the mince seems still to be making some shoppers wary of its chilled and frozen foods.

None of which is to say that Tesco is in serious difficulties, or that Mr Clarke will ultimately fail in stabilising Tesco.

But it does rather imply that the recovery is taking longer than expected. And it raises the possibility that he won't succeed.

What's more, even Tesco's operations in Asia and eastern Europe - which in recent years were the glittering jewels in its empire - have lost some of their lustre.

Carrier bags at a Tesco store in Beijing

Tesco's market leadership in a handful of developing markets overseas remains an enormous source of strength for the group but it is striking that in the latest quarter like-for-like sales fell quite sharply in China, South Korea, the Czech Republic, Poland, Slovakia and Turkey (though the rate of decline in important South Korea has slowed).

But back to Britain.

Businesses, like all social organisms, rise and fall.

Tesco's market share of a third of the grocery market and more than 10% of all retail sales, acquired under Mr Clarke's predecessor, Sir Terry Leahy, put the retailing group in a league of its own, in Britain.

But possibly that supremacy was something of a historical anomaly, too far from the mean to be sustainable.

Maybe, in an inclement climate for all retailers in the UK, and given that Tesco is so big, the very best that can be expected of Mr Clarke is that at some point he stops it going backwards.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 323.

    I stopped shopping at Tesco due to poor customer service after I made a complaint. When I asked the store manager if he was bothered that I would henceforth shop elsewhere, he shrugged his shoulders. A further online complaint went nowhere, so now my annual groceries spending is going to one of its rivals. Haven't been there in over 2 years.

  • rate this

    Comment number 322.

    @302 - I want quality and value and in 4 months an Aldi will open half a mile from our home - when it does that's where we will be.

    We always know we will get excellent produce for much less than any of the big four will sell us it for and the fact none of them compare prices with Aldi or Lidl speaks volumes.

  • rate this

    Comment number 321.

    Rubbish Quality control. If I were the Quality Control Manager I would be very worried about my future.

  • rate this

    Comment number 320.

    Never have I seen so many TOPICs for discussion on the BBC.

    It would seem they would like us to be occupied while they publish news of Labors Tax Avoidance Schemes and there inability to cut the 'cuts'

    BBC you clever dogs you.

  • rate this

    Comment number 319.

    Tesco has been so poor at handling Fresh Fruit and Veg that I buy elsewhere, whilst elsewhere I buy other things!
    It could be that as with so many other companies Tesco is trying Too Hard, trying to be all things to all customers, and has forgotton its core values and strengths. I suspect that I am not alone in having NO Brand Loyalty, My simple request is good value and good quality.

  • rate this

    Comment number 318.

    . ...like MTW wish to travel (walking I hope) 5km to buy his organic spuds then all power to him.
    Run there - Walk Back. Don't want to break the eggs. I just like to taste the actual food, not something which concerns Tescos.

  • rate this

    Comment number 317.

    Best thing that could happen for our farmers and high street is for tesco to go out of business.

  • rate this

    Comment number 316.

    Where I live, the only other competitors to Tesco are a local firm (Shoprite) and Co-op. Prices at Tesco are slightly more expensive than the other two, but the range and quality of the goods, esp fresh fruit and veg is much better. The experience isn't good though. ALWAYS crowded and the Tesco.com personal shoppers make getting round there a nightmare! We are caught btwn a rock and a hard place!

  • rate this

    Comment number 315.

    I went into Tesco's in Cheltenham yesterday.

    I went up to the pharmacy counter and the girl serving there made me wait 2 minutes while she chatted to a co-worker then practically sneered at me before even saying a word.

    A lovely example of Tesco customer service.

  • rate this

    Comment number 314.

    Maybe its simply a case of over supply, too many stores and the UK public not willing to spend more money in the biggest food retailer??.

    Local planners have a LOT to answer for, approving TOO many superstores and local stores...

  • rate this

    Comment number 313.

    Tesco treat their customers the same way they treat their staff - badly.Contrast with JLS - it all filters through the organisation.

  • rate this

    Comment number 312.

    Tesco has become an unwieldy beast, but before it became that it was a ruthless and indiscriminate corporate bully populated by deeply unpleasant people higher up the food chain. They're behaviour towards their suppliers has been appalling, unethical and underhand. The arrogance they have displayed towards their customers is breathtaking, good riddance Tesco and all who sail in you....

  • rate this

    Comment number 311.

    Sir Terry was good, Philip Clarke is just not as good is the simple answer.
    Tesco is now a very poor supermarket, The quality of its produce is rubbish and too expensive. New boss needed.

  • rate this

    Comment number 310.

    pocket loyalty.
    i used tesco, before the credit crunch, when people had money for overspending. now tesco seem to have raised food prices to compensate for non food sales slump to keep their stockholders happy.

  • rate this

    Comment number 309.

    I have long thought that the slogan "Every Little Helps" does not mean in the boardroom what they would like us shoppers to think it means.

    Rubbish quality, food often going off way before its date. Sainsburys, Morrisons, Lidl, you name it all are way better.

  • rate this

    Comment number 308.

    Lots of political and customer service based comments here. None of us like huge corporate monopolies taking over whoever they are. but the truth is money is so tight, that we can't afford to protest shop right now, many of us are simply going to the cheapest supermarkets and that's that.
    I'd prefer to shop in the high street, but I can't afford to park and high street shops cant compete on price.

  • rate this

    Comment number 307.

    It's the small things that point to a rapid decline in customer service. We once returned some ham which had gone off in the pack. The Tesco store manager could not have cared less. He made no eye contact while refunding the money. They have gone over the tipping point from 'good value' to just plain cheap.

  • rate this

    Comment number 306.

    Takes an hour to buy a pint of milk, a loaf , some potatoes , veg, and meat.
    Mouldy raspberries at £2.99.
    Who wants to spend £3.99 on organic tomatoes?

  • rate this

    Comment number 305.

    I'm finding shopping at Tescos more and more expensive every week.
    My energy bills have just risen by 10% and I feel that food price inflation is running at about the same level.
    I don't know where this will all end so I just console myself with living from day to day and try not to think about the future.

  • rate this

    Comment number 304.

    Tesco cut corners by selling horsemeat which, apart from the bute, is actually pretty damn good; put the public off. Public change supermarkets (at least the ones with brain cells do) and you wonder why Tescos profits still aren't soaring? Obviously a Tesco shopper (no brain cells left).


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