The supermarket business is conducted in the language of wars – price wars – so embattled Tesco boss Philip Clarke probably needs to channel his favourite military hero if he is to survive the barrage heading his way.
With Tesco shares languishing at a 10-year low and the UK's biggest retailer due to report a second year of falling profits on Wednesday, Clarke, like Montgomery at El Alamein, is facing a crucial stand – but at a time when his leadership is being called into question.
One former director offers a scathing critique: "I have no idea what Tesco's strategy is and the execution has been crap. Everybody knows Philip is not going to turn around the UK business, apart from the Tesco board."
When Clarke replaced Sir Terry Leahy in 2011 it triggered the biggest leadership change at the retailer in almost a generation. Three years on, the Tesco lifer, with 40 years' experience under his belt, is the last man standing from the Leahy era and the sole executive director on a board where once there were eight.
The scale of the management clearout means that when Clarke reports profits down to £3.2bn compared with £3.5bn a year ago, he will have no one left to blame.
He alone will have to provide the answers as to why, after spending more than £1bn on store refurbishments, extra staff and new product ranges, market share, at 28.6%, is – like the share price – at a 10-year low.
There is no question that Clarke is trying to turn around the 3,000-store UK business at a difficult time. The industry is being rocked as shoppers turn their backs on big stores; the sprawling Extras that helped Tesco conquer Britain in the 00s are now a millstone around his neck.
Clarke has sought to put the brakes on big store openings and focusing investment on convenience stores and its website. He still has the backing of big investors who accept a business of Tesco's size takes time to turn around.
"I know our business is getting better and there is a lag between it being better and people talking about it," he said recently. To boost interest, he has been making space for trendy brands such as Harris + Hoole coffee shops and Giraffe restaurants, as well as nail bars and soft play areas.
Although not without merit, one analyst describes these moves as "fiddling while Rome burns" and the former director agrees: "Philip Clarke confuses activity with progress. In a £70bn turnover business, these initiatives amount to a hill of beans."
While many Tesco stores look smarter today, analysts say it is the price of what's on the shelves that is the real problem; shoppers appear to have no problem with Aldi's and Lidl's workmanlike interiors.
In February, Tesco said it would spend an additional £200m lowering prices of staples such as bread, milk and eggs, but an in-depth study by analysts at Espirito Santo found the retailer to be "more expensive than Waitrose", the PM's favourite grocer.
Espirito Santo's Rickin Thakrar said Tesco was guilty of using "baffling" offers to bamboozle shoppers who had to do a "multibuy landmine dance" to get the best deal on fruit and vegetables.
To save money on a price per kilo basis, including promotions, a customer would need to buy onions singly, peppers in packs of three, pears singly, packs of plums, loose red chillis and carrots, a sack of potatoes, loose broccoli, a pack of oranges, and individual mushrooms, he said of Tesco's pricing maze. Tesco's problems have not been confined to the home front.
Once famous for flag-planting around the globe, the business under Clarke has pulled out of the US and Japan and is in the process of restructuring its Turkish operation.
Previously strong businesses in central Europe and Asia have unravelled while it has even lost its market leadership to Musgrave in Ireland. The change in shopping habits in Poland is if anything more dramatic than in the UK.
"Poland is like the UK on steroids with very strong competition from local discounter Biedronka," says Bryan Roberts, director of retail insights at Kantar Retail.
"Obviously the economy hasn't been helpful but there has been a huge flight to the discounters; and, like here, the hypermarket model is under a degree of pressure."
Industry insiders blame Tesco's loss of form on the fact that it has haemorrhaged talent at the senior level; some claim Clarke's tough management style has crushed what used to be a team culture. They also point to weak leadership from chairman Sir Richard Broadbent.
Given the challenges faced by the sector, they say it now misses the expertise of heavyweights such as David Potts, Tim Mason, Andy Higginson, Carolyn Bradley and Richard Brasher – all key lieutenants in the Leahy years. "The board needs clearing out," says one industry source.
"The chairman has been a disaster and they need to face that. This is an issue of national importance. Tesco is the country's biggest private-sector employer and it is being run by a bunch of incompetents."
Clarke appears to accept he won't have a long tenure at Tesco, unlike Leahy, who ran it for 14 years. "You only have a job like this for a few years," he said. "I'm not a young man. I'm 54 – I've given it 40 years."
theguardian.com
With Tesco shares languishing at a 10-year low and the UK's biggest retailer due to report a second year of falling profits on Wednesday, Clarke, like Montgomery at El Alamein, is facing a crucial stand – but at a time when his leadership is being called into question.
One former director offers a scathing critique: "I have no idea what Tesco's strategy is and the execution has been crap. Everybody knows Philip is not going to turn around the UK business, apart from the Tesco board."
When Clarke replaced Sir Terry Leahy in 2011 it triggered the biggest leadership change at the retailer in almost a generation. Three years on, the Tesco lifer, with 40 years' experience under his belt, is the last man standing from the Leahy era and the sole executive director on a board where once there were eight.
The scale of the management clearout means that when Clarke reports profits down to £3.2bn compared with £3.5bn a year ago, he will have no one left to blame.
He alone will have to provide the answers as to why, after spending more than £1bn on store refurbishments, extra staff and new product ranges, market share, at 28.6%, is – like the share price – at a 10-year low.
There is no question that Clarke is trying to turn around the 3,000-store UK business at a difficult time. The industry is being rocked as shoppers turn their backs on big stores; the sprawling Extras that helped Tesco conquer Britain in the 00s are now a millstone around his neck.
Clarke has sought to put the brakes on big store openings and focusing investment on convenience stores and its website. He still has the backing of big investors who accept a business of Tesco's size takes time to turn around.
"I know our business is getting better and there is a lag between it being better and people talking about it," he said recently. To boost interest, he has been making space for trendy brands such as Harris + Hoole coffee shops and Giraffe restaurants, as well as nail bars and soft play areas.
Although not without merit, one analyst describes these moves as "fiddling while Rome burns" and the former director agrees: "Philip Clarke confuses activity with progress. In a £70bn turnover business, these initiatives amount to a hill of beans."
While many Tesco stores look smarter today, analysts say it is the price of what's on the shelves that is the real problem; shoppers appear to have no problem with Aldi's and Lidl's workmanlike interiors.
In February, Tesco said it would spend an additional £200m lowering prices of staples such as bread, milk and eggs, but an in-depth study by analysts at Espirito Santo found the retailer to be "more expensive than Waitrose", the PM's favourite grocer.
Espirito Santo's Rickin Thakrar said Tesco was guilty of using "baffling" offers to bamboozle shoppers who had to do a "multibuy landmine dance" to get the best deal on fruit and vegetables.
To save money on a price per kilo basis, including promotions, a customer would need to buy onions singly, peppers in packs of three, pears singly, packs of plums, loose red chillis and carrots, a sack of potatoes, loose broccoli, a pack of oranges, and individual mushrooms, he said of Tesco's pricing maze. Tesco's problems have not been confined to the home front.
Once famous for flag-planting around the globe, the business under Clarke has pulled out of the US and Japan and is in the process of restructuring its Turkish operation.
Previously strong businesses in central Europe and Asia have unravelled while it has even lost its market leadership to Musgrave in Ireland. The change in shopping habits in Poland is if anything more dramatic than in the UK.
"Poland is like the UK on steroids with very strong competition from local discounter Biedronka," says Bryan Roberts, director of retail insights at Kantar Retail.
"Obviously the economy hasn't been helpful but there has been a huge flight to the discounters; and, like here, the hypermarket model is under a degree of pressure."
Industry insiders blame Tesco's loss of form on the fact that it has haemorrhaged talent at the senior level; some claim Clarke's tough management style has crushed what used to be a team culture. They also point to weak leadership from chairman Sir Richard Broadbent.
Given the challenges faced by the sector, they say it now misses the expertise of heavyweights such as David Potts, Tim Mason, Andy Higginson, Carolyn Bradley and Richard Brasher – all key lieutenants in the Leahy years. "The board needs clearing out," says one industry source.
"The chairman has been a disaster and they need to face that. This is an issue of national importance. Tesco is the country's biggest private-sector employer and it is being run by a bunch of incompetents."
Clarke appears to accept he won't have a long tenure at Tesco, unlike Leahy, who ran it for 14 years. "You only have a job like this for a few years," he said. "I'm not a young man. I'm 54 – I've given it 40 years."
theguardian.com
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