This week we'll find out if Tesco boss Philip Clarke's £1bn trolley dash is adding up at the till. In April, that was the huge estimated cost of turning around the supermarket's ailing UK stores after everything fell apart during the crucial Christmas trading period.
After years of denying that its home market chain had a problem, the company issued a shock profit warning in January and since then has been washing its dirty laundry in public. This week promises to be another bruising one, even for Tesco's notoriously thick-skinned executives, as Clarke presides over the first drop in half-year profits since 1993.
After earning a reputation for being one of the most consistent performers in corporate Britain, Tesco is expected to announce a 10% fall in group profits to £1.6bn (in the UK they are forecast to be down around 13% at £1.1bn). That will be hard to digest at head office in Cheshunt.
Shareholders will have steeled themselves for the bad news and are now likely to more interested in whether the turnaround plan announced by Clarke in April is working. The money is being spent on sprucing up stores, hiring extra store staff and a long-overdue revamp of its own-label foodstuffs. The plan is not rocket science – in fact, it reads like basic good housekeeping for a retailer the management textbooks have led us to believe is among the best in class.
How the UK stores ended up in such a sorry state remains a moot point and Clarke avoids assigning blame. The less diplomatic would point to the reign of his lauded predecessor, Sir Terry Leahy, who used profits generated at home to plant flags abroad but starved the home market chain of investment.
But they are where they are, and last week's Tesco senior executives appeared confident as they led a guided tour of one of their new-look "Extra" stores in Hertfordshire. It is hard not to be impressed by the zeal of the team, known as the "Baldock Group" after the Hertfordshire store where early crisis meetings were held. They trumpeted new attractions such as artisan-style bakeries, hundreds of "new, improved" products and quirks such as sports nutrition departments, which loyalty card data tells them is a growing market after the Olympics.
There was talk of "green shoots of progress", a sentiment backed up by recent data that suggests Tesco's market share has at least stabilised. On Wednesday it is thought that Clarke will report flat underlying sales – a key measure of performance – ending six quarters of decline in the UK.
Britain is not Tesco's only problem. Clarke is still grappling with the loss-making US chain Fresh & Easy and a setback in South Korea, Tesco's biggest overseas market, where legislation allowing local governments to impose shorter trading hours is hitting sales. But there is also a larger dimension to the depressed Tesco share price. After years of celebrating it for its reliable returns, investors have lost their appetite for the grocery sector as a whole, reappraising it in a new world of turgid sales where shoppers are increasingly turning to the internet to make purchases.
Panmure Gordon analyst Philip Dorgan goes as far as to describe the supermarket sector as "uninvestable" in its current form, relying as it does on expensive new store openings to grab increments of market share. He has calculated that, over the last decade, Tesco, Sainsbury's and Morrisons have splurged £34bn to increase operating profits by a measly £1.7bn. And with the internet sucking all the growth out of a depressed retail sector, the rush to devote new space to clothing and homewares looks foolhardy.
Clarke has already called a halt to the space race, slamming the brakes on UK expansion to focus on the internet and existing stores. It's time other supermarket chiefs followed suit and did a better job of running the stores they've already got.
A platform for renationalisation
While a judge somewhere slowly ponders the merits of Sir Richard Branson's latest legal challenge, passengers wanting to travel between Britain's biggest cities might well be wondering just who is going to be running their trains in 10 weeks' time.
The west coast main line franchising decision is slowly turning from controversy via farce into a question far more fundamental than which firm's livery is painted on the carriages. FirstGroup, who – lest we forget – offered to pay a billion more to the taxpayer than Virgin to run the line, still claims to be confident of organising the transfer of 3,500 staff, thousands of contracts and several dozen rebranded Pendolinos.
But as the December deadline approaches, the government has clearly thought it prudent to get its own people ready to take over the trains instead. Many believe that Directly Operated Railways, the state company currently operating on the east coast main line after the last franchising fiasco, will have to step in for a while, at least when Virgin's time is up.
And during this hiatus, some interesting facts have emerged. The transport secretary, Patrick McLoughlin, said that though the cost of keeping FirstGroup in the waiting room could run into millions, revenues would far exceed it. While First thought it could stump up £10bn over the term of the franchise and still coin it in, Virgin was targeting a 7% profit margin.
Meanwhile, on the state-run east coast service, punctuality is at its highest since 1999, passengers numbers and satisfaction figures are up, and the company has returned the best part of £200m in profits to the taxpayer.
The shadow transport secretary, Maria Eagle, has stopped short of calling for a renationalisation of the railways, although she has signalled that the debate is on. With the prospect of the two main rail arteries being in state hands by Christmas, there may be a few more voices at Labour party conference wondering if it's time to cut out the millionaire middlemen.
Bankers and jail
There is always a clamour for heads to roll when mistakes are made. No more so than during the continuing banking crisis. Many of the big names at the top of the larger banks have moved on.
But this has not answered the lingering question of why no one has been jailed for their part in the financial crisis. Martin Wheatley, the Financial Services Authority executive, summed up the mood when he called for powers to jail those found to have rigged Libor in the interest rate manipulation scandal that gripped the markets during the summer. "Society wants the people who commit these sorts of crimes to pay the price and if that includes jail for the most extreme fraud in the system, then that's what should happen," he said.
The threat of jail is a serious deterrent, and Wheatley is right to hold it over future miscreants. But a society unable to move on from the financial crisis until a banker is behind bars is not a pretty spectacle.
No hay comentarios:
Publicar un comentario