Tesco profits fall by 90%

[Jasandjules]

Good. If they stop ruining pretty little towns with their f***ng Metro stores then I might start using them again.

[Sheepshanks]

Foliage said:

TBH this 96% doesn't seem right, ive not really followed the story, I assume someone was cooking the books in order to get bonus.

It's just playing with numbers - they adjusted a lot of stuff out of the number to end up with £112M. The real number was £783M.

On a smaller scale our accountant does this - we literally do have the "how much do you want the profit to be?" conversation every year.

[crankedup]

turbobloke said:

Adrian W said:

turbobloke said:

crankedup said:

Question is when to buy shares in this Company, soon I reckon. New Management and Chairman with a C.E.O. sounding like he will sort the business out.

Indeed. Soon looks about right.

They won't make any difference the main issue is lower down the pecking order.

Higher orders can sort lower orders Shirley

These are my thoughts and expectation, has all the bad news now been factored into the current price, which is far off the 'pre problem' levels. Looks like it could be a reasonable long term buy imo.

[crankedup]

AJS- said:

And it's only a few short years since people were wringing their hands about Tesco taking over the world, making immense profits and having undue control of the British retail sector.

I don't expect many will see it this way but it's a good vindication of a free(ish) market working properly, and why the left are wrong to think that unregulated markets always tend towards monopoly.

I'm mindful that the Tesco problems have been brought to light in part owing to the major change in buying habits of groceries, the warehouse style. It will be interesting to discover just how long their accounting and declaration of profit procedures has been going on.
If the 'warehouse' style models had not taken customers away from Tesco would their accounts system simply continued along with the seemingly happy go lucky senior management. In essence do we have to thank the 'free market' or the 2008 cash crisis that has brought Tesco to a much lower level.

[crankedup]

SeanyD said:

Can't help imagine their recent store re-fit isn't going to help. Our Tesco hyper-market is now about a third occupied with cosmetic and beauty products and services. We no longer shop there.

The brand new hyper store (never opened)in Cambridge has been iced, building has only just been completed.

[Foppo]

We tend to start shopping more local instead of a big shop once a week.

We have used Tesco regular because it is part of a shopping center and convenient to park.

Can't blame anybody shopping at Aldi or Liddle meat supposed to be cheap.My favourite shop is Marks and Spencers good food for a treat but expensive.

[Baryonyx]

TheInternet said:

The inevitable decline began years ago and will continue for many more. Still very little to commend about the company. Terrible brand image underpinned by lackluster staff, substandard produce and uncompetitive pricing. Seems difficult to find anybody disappointed or surprised by today's announcements.

I used to shop at Tesco all the time when it was convenient for me to go (and I still buy the odd bits and pieces there on a nightshift, but nothing like I used to spend). Now, it's just as easy to go to M&S and get nicer food, or to go to Aldi for a more exotic selection of treats. Tesco's own brand stuff is fking crap, I've no reason to seek it out.

[Magog]

Baryonyx said:

TheInternet said:

The inevitable decline began years ago and will continue for many more. Still very little to commend about the company. Terrible brand image underpinned by lackluster staff, substandard produce and uncompetitive pricing. Seems difficult to find anybody disappointed or surprised by today's announcements.

I used to shop at Tesco all the time when it was convenient for me to go (and I still buy the odd bits and pieces there on a nightshift, but nothing like I used to spend). Now, it's just as easy to go to M&S and get nicer food, or to go to Aldi for a more exotic selection of treats. Tesco's own brand stuff is fking crap, I've no reason to seek it out.

I used to shop there occasionally a few years ago, their own brand stuff, especially the finest range seemed to get progressively worse over a period of time. Felt like a product substitution scam really, and that's one of the reasons I try and avoid them now. Frankly their models broken, and their names mud to many customers. Large hypermarkets are unpleasant to shop in, and don't fit well round how many customers live their lives these days, Who does a weekly big shop on a Saturday anymore? Their metro stores are overpriced, and similarly unpleasant. I think it could be possible that the Tesco brand ends up being unretrievable. Having recently been in a large Sainsbury's they could be in a similar position, lots of electricals and homewares etc of dubious quality, empty boxes strewn all over the place, and lots of double stacked products where they've obviously had to reduce the number of lines they are carrying.

[loose cannon]

I'm no buisiness expert but the bigger these company's get the bigger likely hood that they crash and burn !

[unrepentant]

Foliage said:

unrepentant said:

Sales down 5% is massive in an industry where margins are skinny.

The chairman is rightly resigning, his eye was off the ball. They shouldn't be paying severance to any of the directors or senior people who leave over this business but I bet they do.

Margins aren't skinny the massive drive to drowned the store in own brand has seen to that (which could be part of the problem), its not margins that are the issue. Its market share, they are losing out massively to Aldi and Lidl, Morrison are now weighing in with massive price reductions that is causing them massive issue with share price I believe as their profits are down, Sainsbury's continue their push with a new price reduction campaign and continued store modernisation.

Tesco have an average GM of just under 20%. That may be good for the FMCG sector but it's skinny for retail. Many other sectors in retail operate with GM's of 45-50%. With margins that small and turnover and overheads that high a decline of a few points in turnover can be catastrophic.

[TheSnitch]

Baryonyx said:

TheInternet said:

The inevitable decline began years ago and will continue for many more. Still very little to commend about the company. Terrible brand image underpinned by lackluster staff, substandard produce and uncompetitive pricing. Seems difficult to find anybody disappointed or surprised by today's announcements.

I used to shop at Tesco all the time when it was convenient for me to go (and I still buy the odd bits and pieces there on a nightshift, but nothing like I used to spend). Now, it's just as easy to go to M&S and get nicer food, or to go to Aldi for a more exotic selection of treats. Tesco's own brand stuff is fking crap, I've no reason to seek it out.

Totally agree. I rarely if ever have to bin anything I buy at M&S, whereas half the Tesco fresh food lines are on their last legs by the time I get them home. Consequently I have to scrutinise every ''use by'' date before I put stuff in the trolley or I end up with carrier bags full of stuff that really needs to be eaten at the checkouts.

[Soir]

Welshbeef said:

I used to work for a supplier many many years ago and our "rebates" kept on being pulled forward.

An example

Let's say we have a volume deal from 1/4 -31/3 they hit the volume we paid out - however for 3 years when I was there they kept pulling forward the following years rebate into the current years payment - you may think why would we do that... They cancel promotion on a whim and give them to competitors up your price and decrease competitor price delist within days (we had 5 key lines delisted within 4days for not agreeing - after a number of months we caved in else we would have to permanently mothball production lines/redundancies etc).


Note they were certainly not the only one but were by far the most aggressive in perusing this policy.

Our books were fine accounted correctly - the issues it gave was when you had a revolving door on the buyers side them expecting payment you had to go though all the history again all the email and legal commercial agreements to confirm £x rebate was for x trading year.

Whereas other supermarkets some - you can guess which ones- actually treated you as a partner with close relationships.


I must say at that time the exposure I had with daily updates to the board continual buyer negotiation supply chain management and managing production cycles was one of the most stressful but hugely enjoyable.
One thing I did learn during that time was the importance of risk management and genuine worst case scenario planning and also business reaponsivness and adaptability.

Anyway interesting it has come out - and I will expect others to come out too. Say no more.

You are right about their revolving door of Buyers. Only company I have ever known to move each buyer into a new category every 6mths so that each new buyer of said category looks for new way to squeeze down supply chain costs. It's extremely harsh on suppliers and not normal (retail in particular the buyer would specialise in certain product area and that's it)

[Pwig]

unrepentant said:

Foliage said:

unrepentant said:

Sales down 5% is massive in an industry where margins are skinny.

The chairman is rightly resigning, his eye was off the ball. They shouldn't be paying severance to any of the directors or senior people who leave over this business but I bet they do.

Margins aren't skinny the massive drive to drowned the store in own brand has seen to that (which could be part of the problem), its not margins that are the issue. Its market share, they are losing out massively to Aldi and Lidl, Morrison are now weighing in with massive price reductions that is causing them massive issue with share price I believe as their profits are down, Sainsbury's continue their push with a new price reduction campaign and continued store modernisation.

Tesco have an average GM of just under 20%. That may be good for the FMCG sector but it's skinny for retail. Many other sectors in retail operate with GM's of 45-50%. With margins that small and turnover and overheads that high a decline of a few points in turnover can be catastrophic.

Try working for the motor trade. If you make 5% you are doing well

[Wills2]

Soir said:

You are right about their revolving door of Buyers. Only company I have ever known to move each buyer into a new category every 6mths so that each new buyer of said category looks for new way to squeeze down supply chain costs. It's extremely harsh on suppliers and not normal (retail in particular the buyer would specialise in certain product area and that's it)

We once had 4 buyer changes in 18mths, what a ridiculous way to run a business.

I worked in Cirrus building C for 2 years (2000-2) as a contractor it was Ok then they were firm but fair (mostly) and had some good experienced people, around 2005-6 as I recall they had a massive clear out and started bringing in the kids, many who quite frankly haven't got a clue how to buy product or build relationships.

[Welshbeef]

Pwig said:

Try working for the motor trade. If you make 5% you are doing well

He is talking Gross margin - they carry significant overheads.

Overall they make c5% ish performance depending which is more or less inline with other FMCG.

If you want teens net margin then you need to look at Pharma sector

[The jiffle king]

speaking to someone at the weekend, they hypothesised that Tesco might have been doing this for years and that those suspended were the ones in the seat when the music stopped....... He suggested that he had a friend who might have suspected our seen this happening

[Wills2]

Welshbeef said:

He is talking Gross margin - they carry significant overheads.

Overall they make c5% ish performance depending which is more or less inline with other FMCG.

If you want teens net margin then you need to look at Pharma sector

Not anymore, the market loved Tesco as they returned 5% compared to the market norm of 3% but the tides gone out and guess who isn't wearing any knickers.

Also don't confuse FMCG with Grocers, that term is generally applied to manufacturers that make and market FMCG to the retail sector like Unilever, Nestle and Mondelez etc...

Edited by Wills2 on Thursday 23 October 20:59

[Welshbeef]

Wills2 said:

Not anymore, the market loved Tesco as they returned 5% compared to the market norm of 3% but the tides gone out and guess who isn't wearing any knickers.

Very true - but they need to get back to core business refocus on that and deteine what market place Tesco should play in job done (instead of jack of all trades).

[Ali G]

http://www.theguardian.com/commentisfree/2014/oct/...

http://www.telegraph.co.uk/finance/newsbysector/ep...

http://www.theguardian.com/commentisfree/2014/sep/...

Surprising?

Or 'expectations gap' re (very well remunerated) audit firms.

[Bradgate]

Adrian W said:

The share performance effects a huge amount of the employees, who are in the company sharesave scheme, this cant be good.

Indeed. The ordinary staff will be absolutely shafted by the drop in the share price.

The directors won't care, though. They will still get their multi-million pound payouts.