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Can Tesco recover from worst ever year?

Monday, December 29, 2014 - 02:47

It's slashed profit forecasts four times and is still reeling from an accounting scandal. So can Tesco turn things around in 2015? Hayley Platt looks at the rise and fall of the world's third largest retailer.

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His name was Jack Cohen and he went on to build the supermarket giant Tesco. Today its achievements and its failures often make international news. And 2014 has so far been Tesco's worst in its 95 year history. Stagnant sales, failed overseas expansion and intense competition from the discounters, to name just a few. But worst of all was an accounting scandal which left a £263 million black hole in the firm's finances. That's seen investors heading for the door and credit agency S&P warning it may downgrade its stock to junk. Justin Urquhart Stewart of Seven Investment Management believes that's not necessary. (SOUNDBITE) (English) JUSTIN URQUHART STEWART, SEVEN INVESTMENT MANAGEMENT, SAYING: "The new management has come in and cleared the shelves, or at least the financial shelves to make sure it's cleaner and meaner. I suspect now that Tesco is in a much better position to sell off certain assets it doesn't want and to find itself growing from here." Cohen started the business selling army surplus food after the First World War. He took just £4 in sales - £1 of that was profit. It would take more than 70 years for Tesco to overtake Sainsbury's and become the UK's biggest supermarket. By 2009 profits had risen 10 percent to over 3 billion pounds. But it wasn't to last - four years later Tesco issued its first profit warning. Stephen Springham from Planet Retail believes Tesco will recover in time. SOUNDBITE: Stephen Springham, Senior Retail Analyst, Planet Retail, saying (English): "I don't think the consumer takes too much stock of these things so yes it's not a good thing to have against your name but it's actually what they deliver on the shop floor that the consumer's going to care about." Many analysts say the problems started when Tesco took its eye off its key home market to concentrate on expanding abroad. That turned out to be to the advantage of two German discounters. SOUNDBITE: Bryan Roberts, Director of Retail, Kantar Retail, saying (English): "The common wisdom is that Tesco was doing really, really badly because of Aldi and Lidl. Where you can take the opposite argument which is Aldi and Lidl are doing really well because Tesco made a number of massive strategic errors, so I think the big worry for Aldi and Lidl is what happens if Tesco gets back on its game." It could still be a while before that happens. Shoppers seem to be spending less on food at the moment. Even Sainsbury's chief exec thinks it will be at least two years before the market fully returns to growth. That gives Tesco's time to try and recover some of the 50 percent its shares have lost so far this year. And restore confidence in both investors and customers.

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Can Tesco recover from worst ever year?

Monday, December 29, 2014 - 02:47