Tesco shares...

lalman

We just need Tesco's to stop losing market share for the share price to recover somewhat.

I am sitting on a paper loss now but I really am not worried about it because I do feel its in a good position to eventually develop.

Scarpacci

I think more worrisome to Tesco investors than the eroding market share is also the prospect of margins being decisively shrunk by the new CEO. It's too early to tell whether he'll decide Tesco's ~5% margins are too high and must be cut, but the market seems to be expecting something along those lines and it's putting pressure not just on TSCO, but on SBRY and MRW. Seeing market share go from 30% to 28% or so will hurt much less than seeing the margins go from 5% to 3%.

I don't know that Tesco's margins are too high, but the gossip is they will be cut (above and beyond the promos & price cuts they've already done). Morrisons generally managed 5-6% margins too for a long time, with few people thinking it was an expensive supermarket. Sainsbury's always seemed weaker on margin, but people don't associate it as being a cheap supermarket. ALDI reportedly has 4% margins. So it's important to remember the margin doesn't necessarily reflect how "cheap" things might seem to the consumer. The perception Tesco makes too much profit and is thus "overcharging" might be pervasive, but the general perception of companies is quite often balderdash.

I don't think it would help Tesco for prices to just be cut across the board, willy nilly. For example, are people leaving Tesco because Tesco Finest is too expensive or perhaps that the food wasn't good enough? They may be the customers who've gone to Waitrose and pay more now. So cutting prices there doesn't seem wise. Tesco are refreshing the finest line so we'll see. At the other end of the scale, the value range needs to be priced in line with the discounters, but are Tesco making 5% margins on that anyway?

The media's fascination with the profit margin as a barometer of how much people are getting "ripped off" is irritating and I hope the supermarkets don't fall for this. There are many reasons to cut prices or sacrifice margins for quality, but doing it to escape the negative image of a profit margin that "looks too high" is not one of them.

hyposmurf

Originally Posted by flashnazia I still can't see the appeal of aldi and lidl over tesco though. It may be slightly cheaper but the shopping experience is horrid: dimly lit, messy, cramped stores, surly staff who are few and far between, bread and fruit that tastes awful. Maybe my locals are of lower par than elsewhere?

Stompa wrote: »

Quite possibly, that's not been my experience at all.

Thats not mine either.What I like about Aldi and Lidl over the big 4 is that they provide decent quality products at better prices than the big 4.They also have a new range of products each week.The fruit and veg is often better quality than Tesco and far cheaper.The stores seem to be more efficiently run.I like to be in the store,quickly buy what I want and out.Like for instance the fact they make more of a push for you to use reusable bags than carrier bags, its annoying at first but you soon get used to it and end up making a difference to our plastic bag waste probl!m.They also encourage you to pack quickly or pack properly at the desks beyond the counters.I use the big 4 to get a few products I cant get in Aldi and Lidl.The only downside to using these two stores is that their popularity has grown so much, the stores and car parks are very busy.
Tescos I think have a long way to go to attract back the custom they have lost.I personally think they have grown too quickly and have more overheads to meet.Their stores are bigger, have more staff and stores that have music and flat screen seems like a waste of money.They either need to downsize to become more efficient or provide something that irresistable that Lidl and Aldi dont.Ive noticed that some are now providing more atrractive restaurant chains on site which might be the start of this.
Morrisons again face similar challenges as do Tesco, I have and maybe others have started to shopping at Morrisons, as they are now starting to compete more with Aldi and Lidl on price.I also find they offer many ranges of food that the other competitors dont.Their fish and meat is usually good quality and value.
There is also going to be a difference from town to town on peoples view of the supermarkets,depending on the individual qulaity,size and age of the supermarket store.

Minrich

My parents ran their own supermarket for 45 years , their profit margin was 19% , how Tesco can do it for 5% is beyond me . Aldi and Lidl are reportedly only on a 1-2% margin .
It would be interesting to know what a Tesco convenience store runs at . Similar sort of shop to my parents who had Tesco open up less than a mile away and their Turnover went up ! Then a Sainsburys about half a mile away and it went up again ! Personal service was their USP and everyday you would see either my mum or dad on the shop floor . They have been retired 10 years soon and very very well deserved , the shop has gone so downhill since they sold up that reports are that it will close soon , due to the new owner never being there and only run by staff !

Glen_Clark

Minrich wrote: »

My parents ran their own supermarket for 45 years , their profit margin was 19% , how Tesco can do it for 5% is beyond me . Aldi and Lidl are reportedly only on a 1-2% margin .
It would be interesting to know what a Tesco convenience store runs at . Similar sort of shop to my parents who had Tesco open up less than a mile away and their Turnover went up ! Then a Sainsburys about half a mile away and it went up again ! Personal service was their USP and everyday you would see either my mum or dad on the shop floor . They have been retired 10 years soon and very very well deserved , the shop has gone so downhill since they sold up that reports are that it will close soon , due to the new owner never being there and only run by staff !

You don't say whether its Gross margin or Net margin
Small niche market foodstores with low turnover, or those with a local monopoly, may achieve 19% net margin. But none of the mainstream volume supermarkets could even get close.

alanq

If the Daily Mail is to be believed (!) Aldi prices in Europe are even lower than the UK so there may still be scope for further cuts if the big supermarkets try to compete with them on price. (I suspect that there may be higher costs operating in the UK which may partly account for the difference).

http://www.dailymail.co.uk/news/article-2720938/Aldi-It-isn-t-half-cheap-Europe-British-shoppers-bargain-supermarket-pay-nearly-twice-Germans-Spanish.html

Minrich

If Aldi and Lidl can do it , be assured Tesco can do it too . What you get now is shopping in several places where in the past people just used to go to one place , this is what has hit Tesco and helped Aldi/Lidl .
The public think that they are saving but are they really , the time taken to go to two shops or three or four is not taken into account and also the fuel cost of getting there .
Knowing how Tesco select their Fresh Veg/Fruit etc i really doubt that they are any less quality than others . I really do hope that Tesco do turn it around , they are British company afterall and Aldi/Lidl are not .
Those that spout "Buy British" are probably the ones shopping at Aldi ! Tesco require such huge quantities that it is impossible to buy ALL British , people want Strawberries at Xmas afterall and other fruit/veg out of season , so they have no choice . Shoppers have caused this to happen , the same as striving for everything cheaper .