Tesco rejects rival’s outspoken attack on customer service

Published on 09/04/2012 00:00

TESCO frostily rejected criticisms yesterday of its service to customers by Justin King, head of arch-rival Sainsbury’s.

Britain’s biggest supermarket group, which has a market share of about 30 per cent, is believed to be privately astonished at the attack by King as there is an unspoken agreement among the major industry players that they do not comment specifically on each other.

However, in a newspaper interview, King – who has won plaudits for turning Sainsbury’s around over the past few years – claimed that Tesco had effectively taken its eye off the ball on customer delivery.

King said: “They have not executed well for customers. It was true of us in the 1990s.

“We’ve been able to see for a long while that what we deliver in service to our shops is significantly better than Tesco.”

A Tesco spokesman said yesterday: “That’s one for Justin [to comment on]. It’s not something we would come back on.”

The timing of the attack is unfortunate for Tesco as it put out its first profit warning in decades earlier this year, leading to billions of pounds being wiped off its stock market value. The company is also seen as being destabilised by serial management change under chief executive Phil Clarke, who took over from long-term boss Sir Terry Leahy last year. That change includes the recent abrupt departure of the head of Tesco’s UK business, Christopher Brasher.

One food retailing executive said: “It is ten days to Tesco’s annual results announcement and it is becoming a bit of a lightning rod for criticism these days.

“The public criticism from a rival supermarket group is more aggressive than you would usually see, however. It’s more overt and I don’t think Phil Clarke will be happy.”

King’s criticism will sting more as Sainsbury’s recently posted a 2.6 per cent rise in fourth quarter like-for-like sales, while its bigger rival’s equivalent sales fell 2.3 per cent in the six weeks to 7 January.

King hinted strongly in his remarks that he believed one of Tesco’s main problems in the UK was that its bigger stores were not as consumer-friendly as those of a similar scale being opened by Sainsbury’s.

Further pressure was put on Tesco at the weekend by Legal & General Investment Management, which holds 4 per cent of the group. LGIM suggesting that the retailer should ditch its loss-making American business, Fresh & Easy.

Tesco entered the American market in 2007-8, but Fresh & Easy has never made a profit, racking up cumulative losses of about £750 million.

Dave McCarthy, a food retailing analyst at Investec, said: “Without a decent UK grocery business Tesco has nothing. I think America must be a distraction to it.

“If they had executed the stateside business well it could have been a huge opportunity for Tesco. But they spread themselves too thinly and did not listen to what customers wanted.”