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Tesco shares nosedive in Big Price Drop fiasco
Jonathan Prynn and James Thompson12 Jan 2012
Tesco shares crashed today after Britain's biggest supermarket said it suffered its worst Christmas for two decades.
The "disappointing" trading figures - likely to be the worst of any of the big supermarkets - raised fears that Britain is turning off Tesco after almost 20 years of unchallenged supremacy.
Natalie Berg, of consultant Planet Retail, said: "Tesco has taken its eye off the ball. It has focused too much just on the price of food. We now all expect high-quality food and everyone is claiming to be the cheapest - consumers are much more wary. Sainsbury's has got the balance right in terms of quality and value."
Britain's biggest private sector employer also issued a virtually unprecedented profit warning after its £500 million Big Price Drop bonanza failed to tempt shoppers into stores, leaving sales in the UK down 2.3 per cent at it busiest time of the year.
The figures stunned investors and Tesco shares slumped 53.5p, or almost 14 per cent, to 331.6p, wiping more than £3 billion off its value.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "Unfortunately the Big Price Drop reported in this update will be remembered as more reflective of the shares than the campaign." Philip Clarke, who took over as Tesco chief executive last March, denied that the price initiative had been a flop but admitted "we could have done a better job communicating it".
The share price slump comes the day after Sainsbury's said it had enjoyed its best Christmas with like for like sales growing by 1.2 per cent.
Tesco's market share has also started to slip, from 30.5 to 30.1 per cent of grocery sales over the past year, according to figures from researchers Kantar. Mr Clarke blamed rising prices for much of Tesco's problems saying that inflation was "eating into" consumers' disposable income.
He said profits in the current financial year would be at the bottom end of City expectations and in the following year there will be "minimal growth" in group profits.
Tesco, which has 2,700 stores in Britain, hopes to win consumers back with a stores revamp that has been piloted in 15 branches and has been rolled out to 200 more in the past six weeks.
Reader views (17)
Tesco in London is a nightmare. You cannot move in the crowded, narrow aisles, exacerbated by staff stocking shelves from enormous metal cages. (why aren't they on the tills?!) And cardboard boxes piled high. It is just the most untidy and unappealing food store I have ever been into and I only use it if I am too pressed for time to walk to Waitrose a couple of blocks further on. And a joy to be in. So pleased I sold my Tesco shares a few months ago ..
- Diane C, london, 12/01/2012 19:26
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Tesco were good, but their deemed top end food is the same cheap garbage just packaged better.
Why anyone can support a firm that doesn't give a fig for local communities and is happy to wipe out local stores and then offer less choice at higher prices beggars belief.
All power to the elbows of Waitrose, and Morrisons and Aldi, long may they steadily attack the others so that the end customer gets quality and value for money.
Tesco, Asda and Sainsburys just don't get the message: the customer is far smarter than they realise.
As for the supermarkes offering financial services, what exactly are they offering, when it is just white labelling for someone prepared to apy them to use their distribution.
And returning to Tesco lets not forget the costly waste of money they are putting into America.
- Robert Marshall, London, 12/01/2012 18:00
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"What I would like most to end is ' Two for the price one offes '. It encourages waste and does not help the poorAlan, England land where we once had shop inspectors and consumer law"
Why?
Where is the waste if you only buy non perishable item, like pasta, rice, dry beans, lentils, washing up liquid, shampoo, conditioner etc etc?
Supermarkets don't force anyone to buy what they don't need, methinks.
- John Smith, London, EUSSR, 12/01/2012 17:02
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Tesco is not cheaper then Waitrose and TESCO selling inferior stuff.
- nico, london, 12/01/2012 16:41
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What I would like most to end is ' Two for the price one offes '. It encourages waste and does not help the poor. On all such offers one should have the right to buy one at the lowere price. I actually know of one lady who buys two for one priced chicken, so she cn give one to the foxes or more than likely rats.
When I was in retailing if you offered something reduced you had to have it one show during the last six months at the original price.Today on television some firms offer a new sale every week, ending always Monday,
- Alan, England land where we once had shop inspectors and consumer law., 12/01/2012 16:34
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Good, Tesco's getting a taste of their own medicine! How many other businesses go bust in Tesco's quest to dominate all areas of business? .. Lower may their shares fall!
- Vince London, West London, 12/01/2012 15:35
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I swapped Tesco for Aldi's! My Weekly shop costs half the price of what it did in Tesco! Tesco are Rip of merchants
- Paul Humphreys, Essex, 12/01/2012 15:01
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Dhan rag, Why are shareholders greedy. Biggest percentage of shares are held by pension funds and you have seen recently how upset trade unions and private pensioners get when their pensions are cut. I have lost most my pension due to Equitable Life crash, building society pays no interest so I am dependent on what I earn from dividends from the little I have now invested.The alternative was communism and prison camps in Siberia for those who do not agree
Incidentally what does Dhan rag mean.
- Alan, England ., 12/01/2012 13:45
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Now that Anthony Worral Thompson is seeking help they should see things picking up a bit.
- Josh, London, 12/01/2012 13:33
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I stopped shopping at Tesco because of their contempt for cyclists. My local Tesco megastore has a measly four bike stands but parking for 300 cars. I got tired of trying to find somewhere to lock up my bike.
It annoyed me so much that when I do the weekly shop in the car I now go to Sainsbury's.
- East Ender, London, UK, 12/01/2012 13:31
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Good news for consumers and bad news for greedy shareholders. Hopefully discerning mcustomers no longer want to be conned by gimmicks. Prepare a shopping list and stick to it and shop in your local high street. The exercise will do you good as well.
- dhan raj, basildon, 12/01/2012 13:03
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Unfortunately this is likely to prove temporary, unless finally consumers have opened their eyes to what has been going on for years and enabled such disproportionate flooding of this small island by the same grasping monster business. Lovely old high streets have been ruined in the pursuit of ever more profits, massive profits in business parks outside the villages affected etc.
Should this hungry monster continue to lose business it will be a true test about who this company really cares about, by which I mean will they suddenly start closing down the less profitable branches of whatever size is affected, and dump the staff out of the door in a recession, or will they offer them reasonable alternative employment options, not ridiculous numbers of miles away from home?
We will watch with great interest oh greedy monster and rely on the web to keep the country informed about any actions you may take.
- Concerned Observer, Harrow, 12/01/2012 12:49
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Yeah - those self service tills just show that they don't listen to customers - they just don't work properly.
- Richard, Hoxton, 12/01/2012 12:39
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I think the consumer has got wise to these so called offers / deals and price drops and actually they just want quality at an affordable price - interesting how Tesco / Morrison's / Sainsbury's all felt some drop yet the smaller supermarkets like Booths did well !
- Mrs.D, London, 12/01/2012 12:34
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Nothing to do with self service tills then?
Whenever I visit I see nothing but a huge queue of people who only want a sandwich and a drink for lunch being kept waiting because of these stupid machines that refuse to accept coins (cards only), unexpected items in bagging area (guilty as charged), or some other unspecified malfunction.
Do yourself a favour Tesco and hire some more staff for the 10 items or less checkouts and the cash will keep rolling in.
If I'm kept waiting for more than five minutes I just ditch the lot on the floor and walk out. There are other stores that want my custom and you clearly do not.
Oh, and while we're at it, hiking the price of everything for one month by 25% and then dropping it back to the usual price isn't what I would call 'the big price drop'.
How stupid do you think we are?
Muppets.
- Daddy, Kensington, 12/01/2012 12:26
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the tesco price drop is a fiasco. it cannot hide the fact that many of the products in store have rocketed in price.
- h young, pembroke, wales, 12/01/2012 12:21
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I think that some shoppers are at last getting to know that some supermarkets headlining some good offers whilst increasing prices across far more items.I use the smaller supermarkets these days and watch what I spend and they don't do the offers such as get 18 yogurts for the price of 6 but I don't need the BOGOFF deals.
- Mike Melbourne, Bedford, 12/01/2012 12:13
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