If you have been following the news and numbers around the supermarket retail segment in the UK, you would undoubtedly have started getting aware of the carbuncles that Tesco is having to deal with off late. What has always seemed to be strengths for this company just don’t seem to be good enough. Sure, Tesco is still the largest retailer in the UK but it has slid to #4 globally.
Trouble certainly is mounting. Multiple profit warnings have been issued and share price has been going south for a while now. Recently they figured and declared that they had overstated their figures by some $400 mn. That led to action against some very senior employees.
Tesco’s position in the UK market is still strong and it still holds almost 29% of the supermarket business with the next competitor (ASDA) at 17% and is still the leader in online retail. However, the growth being shown by competition vs Tesco should be a serious cause for worry. Low price and hard discounters are eating away at market share rapidly. It is usually seen that successful companies, in times of trouble, take on shorter term tactical measures for course correction and often miss out the longer term larger picture. Is that what is going wrong with Tesco now?
But the tale of woes continues with the company now staring down the barrel of a £250mn black hole of a shortfall. Sainsbury’s has taken the opportunity to stand up and question how such an accounting glitch could possibly happen. Mike Coupe, Sainsbury’s CEO recently said: “We are a values-based business, which means we do the right thing.” Now, the new Tesco CEO, Dave Lewis (joined only last month) has gone on to say (in an email last week) that the culture at the company must change.
If all this were not enough, it has had to take delivery of a private Gulfstram 550 jet that it had bought last year for $50mn. It is expected that they will sell this plane along with the other four aircraft it owns thus wiping out its entire fleet of aircraft. The sale of all the five aircraft is still not expected to be able to plug the £250mn deficit.
Clearly not great times for Tesco, and troubled times ahead for Dave Lewis.