Tesco, the world’s third largest retailer, are back in the news again today following a further drop in their market share.
But is it really a drop? In comparison to last year, it certainly is. The 30.9 percent share at this time in 2011 has dropped 0.2 percent over the 12 week period leading up to mid April. However, it is a 0.5 percent increase on last quarter’s figures, which brought about their first ever profit warning in January.
Back in February, when those figures were announced, a profit drop of one percent to £2.5 billion was revealed, alongside a 1.6 percent drop in like-for-like sales in the UK including a 2.3 percent decrease over Christmas. Not even an international increase of 17.7 percent was enough to drag them out of the mire.
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It would seem that they haven’t quite recovered either, with new Chief Executive, Philip Clarke unable to bring the UK store back to the dizzy heights they have reached in recent years, or even up to last year’s standards.
A common complaint regarding Tesco during their slump has been the levels of customer service and store quality, and Mr Clarke has vowed to address this as he attempts to steady the ship. An estimated £1 billion is expected to be pumped into the company, distributed around 8,000 new staff members and an interior overhaul within the individual shops.
But where have their customers gone? It would seem that Walmart’s influence is coming to prominence more and more in the UK through their Asda stores, whose 8.3 percent increase in sales put further pressure on Tesco to change their fortunes. Sainsbury’s have also continued their progress with an increase of 5.4 percent.
Kantar retail have revealed that this represents an overall grocery market increase of five percent, which is the highest since January 2010. High food prices have been attributed to the trend, however.
Sam Hart, an analyst at Charles Stanley, believes that while there is need for a revamp, the road back for Tesco may be a long and complex one, with things getting worse before they get better.
“We think the plan to revive the UK business is credible, but the process is likely to be a protracted one,” he explained.
“There is also a material risk that further investment in the UK business could be required in subsequent years, putting additional downward pressure on profitability.”