TESCO chief executive Philip Clarke has had a year to forget, though he will hope that tough decisions being taken now will get the supermarket group back on track.
The biggest of these concerns the company’s Fresh & Easy business in the US where £1 billion has been committed but decent returns appear unlikely. The choice facing Clarke is whether to expand, and spread the cost of overheads, or pull out. The number of stores in profit has increased, but sales growth has slowed.
Clarke has ordered a review and US boss Tim Mason, once a rival for the top job, is leaving. It looks like F&E’s days are numbered and the markets showed their approval by marking the shares up.
But the City’s patience with Clarke is running thin and there is little confidence behind the shares. Clarke is accused of tying up too much capital with little return, of failing to communicate effectively with the customer and allowing the core UK business to get squeezed between Waitrose at the top end and the discounters at the bottom. Earlier this year he announced the company’s first profits fall since 1994.
In Clarke’s favour is the decision to act early on the US and there are signs of some progress in turning round the UK stores. A good Christmas could make all the difference.
And every little also helps for Osborne
THERE was never a chance of Chancellor George Osborne using his Autumn Statement to give much away, but let’s be grateful for small mercies.
The suspension of added fuel duty was expected; the additional 1 per cent cut in corporation tax from 2014 was not. It will ease costs and puts Britain in a competitive position for attracting overseas investment.
Small firms should be particularly pleased with the tenfold increase in the annual investment allowance, though they will be wary of it sticking, as politicians have a tendency to increase and decrease such allowances on a regular basis, thereby denying businesses the certainty they crave for investment planning.
But the increase in air passenger duty, a failure to do anything to help the construction and housing industry or provide details on the proposed Business Bank perhaps said more about Osborne’s lack of elbow room.
Among the more intriguing, and controversial announcements, was the new deal on promoting gas, including tax breaks for shale gas.
The government is clearly keen to meet the demands of the energy lobby for more capacity and sees gas-fuelled power stations as quick and cheap to build, and a relatively clean source.
But this new “dash for gas” might divert attention from other green projects, renewables in particular.