Tesco £6.4bn loss

[Workingman]

I hasn't really lost £6.4bn, it is more an accounting device, one which coincidently reduces tax payments. However, trading profit is at £1.4bn, OK that is down from about £6bn 18 months ago, but still not to be laughed at - Tesco is having a tough time, but it is not failing.

What the loss really represents is a revaluation of its property portfolio. Unlike the housing market the property market has lost value and Tesco holds a lot of commercial property. Commercial property prices are down because, as we are so often told, the High Street is dying. The irony is that the High St is dying because the big four supermarkets opened stores offering everything under one roof on any plot of land they could find; and the independent shops shut.

Masters of their own downfall, hoist on their own petard.......

Shame.

[Aggers]

Thanks for that post, Frank.

It's answered several points that I couldn't quite understand.

Understanding how big business runs today is almost as difficult
as understanding how computers work. (For me, anyway!)

[Workingman]

John, when I was in the waiting room this morning there was a discussion about this on TV. I quite liked one opinion which was that Aldi and Lidl had gone back to a time when UK supermarkets led the world..... before following the American model of Megastores. They were big enough to stock about 90% of a family's needs in one shop, but not too big to be offering everything, and more.

Having 500 tins of Baked Beans on display offers no more choice than a shop with 50 tins on display.

[Suff]

£1.4bn on turnover of £38bn is 3.6% turnover profit. In fact real profit is actually lower even disregarding all the financial shenanigans. That is a razor sharp profit margin which the group can only support because it is so big. If it were smaller, 3.6% would be too small to survive.

I would love to see their detailed breakdown because I'm willing to bet their transport fuel bill is close to £1bn. So any large jump in fuel prices will massively impact that profit.

You are right WM in saying that they are too large in some ways, but in others it is only their sheer size which is making them survive this way. Also their online sales which require minimal staff is boosting profit. Something to think ling and hard about.

The UK could benefit from some UK mid sized supermarkets, but with Aldi and Lidl challenging the larger stores, there is no chance they could survive without the buying power. Reality is that Aldi and Lidl are so large world wide that they have the buying power of a Tesco or ASDA.

I don't expect any change in the model any time soon.

[Workingman]

I don't expect any change in the model any time soon.

Nor do I, but an interesting observation was made in the discussion. It was that people have become bored with concept of a half-day long shopping trip to a megastore on the weekend.

I do not know if there is any real evidence for it, but I can well imagine it being true. A family where both adults work is already time poor, as far as rest and recuperation is concerned, having to use up a big chunk of it doing shopping is a waste of that time. It is something that makes online shopping so appealing for many people, and therein lies another problem.

With the current model we, the shoppers, do most of the work. We get a trolley, go round the store picking and choosing our goods, we take them to the checkout, bag them and take them home. The online model requires separate units from the stores. They are filled with highly technical, and expensive, automated select and deliver systems. These need servicing by highly trained technicians. Goods still need to be put on the shelves so there is an army of fork-lift and pallet truck operatives, then at the other and another army and fleet of vans and delivery drivers. Those vehicles do not run on fresh air and they certainly have to be kept roadworthy and legally insured. The Amazon model, with loads of suppliers dotted around the country and using existing delivery services, it ain't. For the supermarkets online shopping is expensive.

The trouble, for them, is that it is here and it is not going to go away, they will have to live with it and make it work.

[TheOstrich]

There may be a taste for on-line food shopping and home delivery, but our local supermarkets still seem to be rammed to the hilt most mornings, especially after the schools run. 30-odd checkouts at our Asda and the vast majority in operation just now - and still folk were queueing!

On-line shopping is all very well, but we found when we experimented with it that (a) there wasn't the "choice" (b) you couldn't easily "browse and compare" and (c) took just as long as hurtling down to the store.

Today, Tetley tea bags - 160 pack had a unit price of 89p per whatever. 240 pack had a unit price of just 39p per whatever. Easy to pick the best value item off the shelf, less easy, I suspect, on-line ....

[pederito1]

Strongly suspect an accountancy ..er..arrangement to have a mighty tax loss for the future when their offshore..er..deal hits the buffers.

[Workingman]

On-line shopping is all very well, but we found when we experimented with it that (a) there wasn't the "choice" (b) you couldn't easily "browse and compare" and (c) took just as long as hurtling down to the store.

You are probably right, Ossie: for you. However, we saw from the other thread that many people either do not know how to compare or cannot be bothered, they just want the whole thing over and done with; and if that means getting into a routine of ordering the same things over and over, so be it. Convenience has become King for many millions with cost a distant second for a lot of them.

[medsec222]

When I was working I used to go to Tescos probably once a week, twice at most, and fill my trolley with enough food to last the week. It was easy and convenient, especially as the Tesco I shopped at, is one of the larger superstores. It was a half hour journey by car to get there.

However since I have been retired, I prefer to shop at my local Morrisons. It is a much smaller store and has less choice. However, it suits me to go in most days and see what is on offer as there is usually something on the meat, fish, and deli counters most days. Lidl and Aldi are nearby and I browse in there from time to time. I now find that the large superstores are less appealing and I can't be bothered hiking round them as I used to. Perhaps bigger is no longer best.

[Suff]

My Daughter has been a Tesco online shopper since they were using dial up modems to get online. As an accountant she did extensive studies on her buying habits between online shopping and going to the shops.

She found that if she planned what she wanted for the week, ordered it on Tesco Online and only went to the shops occasionally, she spent less money in the shops because she was not "enticed" into the "good deals" that she didn't know she needed...

I recall that Tesco used to have a "standard basket" of goods which you could then add to with any additional items that you wanted. I had heard that Tesco removed this feature because people were simply ordering the standard basket of goods then going to the local supermarket (of any kind), for other goods. Thus being exposed to other stores "deals". As Tesco is unlikely to make as much as they would like out of the routine weekly order I can understand that. Maybe they have it back, I don't know, because I've only used Tesco Online once and that was to order some trousers for Work wear that they did not have in my size.

What this comes down to is the divide between time and money. If you spend most of your time making money, then your "off" time is precious. Therefore you do not want to spend all day Saturday wandering around the shops trying to find what you can get in one Tesco Superstore on, say, Tuesday evening, leaving the weekend free for leisure or family time.

I know that here, in Brussels, with my limited time, due to weekend travel twice a month, that I prefer the larger hypermarkets as I only have so much time to get in, out and all of my shopping done. That includes shoes when they fall apart (recently), or other goods like the SD cards for my Raspberry Pi or phone, which are such a hassle to get online as I'm always having to pick them up from the post office.

So, to me, it comes down to your perception. If you are working you are more likely to want Online shopping and one huge store to reduce your shopping load. If you are not working, then you are more likely to want more smaller shops locally to reduce your travel costs and more offers to reduce your shopping bill.

Currently more people are working. If that changes then so will the supermarket format.