New Tesco results set to shock


Tesco stores closed in security alert

Is the sun setting on Tesco? Shockingly weak sales are expected from Tesco mid-week. Sales are expected to have slipped by around 4% - possibly more - for the last 12 weeks when the quarterly numbers arrive on Wednesday, signalling greater gains for budget players like Aldi and Lidl. Tesco profits slumped almost 7% last year.

Has the nation's shopping habits changed permanently - to Tesco's loss?

Get a grip

"We believe Tesco UK," Clive Back from Shore Capital told the Mail, "is increasingly perceived by customers as simply too expensive versus the discounters, Asda and potentially Morrisons. That is a dangerous and frankly untenable place for a mass-market leader to be."

What a sorry picture. Tesco has no grip at the posh end - Waitrose, M&S Food - while its presence in the cheap and middle is being steadily gnawed by Aldi, Lidl and, to some extent, by an increasingly discount-minded Morrisons.

Back in February Tesco made much talk of committing £200m to snipping prices in an attempt to take the cheaper discounters on.

Meanwhile boss Philip Clarke is halfway through a refurbishment project in an attempt to apply some gloss to the tarnished brand (last year the grocer was fined £300,000 for misleading customers on so-called offers).

Trust in Tesco?

Recent analysis by the Grocer magazine is unflattering. The Grocer claims that since Tesco's Prices Down and Staying Down' campaign, Tesco has hiked the price of 1,350 items while cutting the price of 1,012.

"Even including deals, it has increased more prices than it has cut, albeit by a narrower margin," The Grocer said in early May. It's not all about the price ticket either.

Consumers are increasingly aware of supermarkets snipping pack size and weight, so prices rise even though the sticker label doesn't.

The bigger question is whether British consumers have fallen out of love with Tesco permanently or whether, like fashion, it's just a phase. No-one likes being patronised or over-charged, especially over long periods. Forgive and forget? Not if there's a cheaper alternative close by.

At 300.70 (at time of writing) Tesco shares are somewhat above their 52-week low of 278.50p but way off their 386.40p high. For some investors Tesco shares, like some of their prices, may still look too expensive.

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