Stephen Jardine: Is the end in sight for Tesco?

Stephen Jardine. Picture: Jon Savage
Stephen Jardine. Picture: Jon Savage
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This column starts with an apology. The last time I wrote about Tesco, I promised it would be the last. After analysing Horsegate, dodgy accounting practices and repeated sets of poor financial results, it really felt like time to move on. But it’s impossible to ignore the calamity of the past week.

Tesco’s £6.4 billion pre-tax loss is the biggest in the history of the company and the largest ever recorded by any UK retailer. The numbers are mind-boggling but, in simple terms, it lost around £100 for every person in the country.

By slashing the value of its property portfolio and adding that to reductions in the value of sales, Tesco chiefs seem to be hoping one whopping final piece of bad news will then be followed by the start of the turnaround. I think they are wrong.

Tesco is in trouble because people want to shop in places where they get good value or feel valued themselves, and the supermarket giant ticked neither box.

Back in its boom time, it treated customers with barely disguised contempt and filled the shelves with deals that bamboozled shoppers and harmed suppliers.

Now it’s payback time. Most shoppers interviewed about Tesco this week had the same message – they simply don’t like the brand.

Many have deserted it for discounter brands such as Lidl and Aldi and some have traded up to Sainsbury’s and Waitrose. Many others have abandoned the big weekly shop in favour of several visits to local food shops, supplemented by the supermarket where necessary. That is a big change from how we were shopping five years ago and the statistics from butchers to bakers and greengrocers seem to back it up.

In Dundas Street in Edinburgh, there is a vivid example. On one side of the street, a new artisan bakery is getting ready to open. On the other side of the street, an empty shop has a sign up advertising a new Tesco Metro. Which one are you most interested in visiting?

In this Year of Food and Drink, troubled times at the supermarkets offer a great opportunity for local shops. I’d like to see them work together on a 10 per cent campaign, where everyone in Scotland is challenged to make sure a tenth of what they spend each week goes on Scottish produce bought from small retailers. It is a small target but offers a simple way to focus on how and what we spend. From humble beginnings, a jump to 
20 per cent and then 25 per cent would be next.

I can’t think of a better legacy from the Year of Food and Drink.

As for Tesco, with the Serious Fraud Office still to report, this may just be the start of poor customer attitudes to the brand. Back in 2007, Tesco took one in every £7 spent in the UK. Now its very survival is in doubt.