Future of tesco, morrisons

IronWolf

antrobus wrote: »

February 2011 - Morrisons buys Kiddicare for £70m in order to give it the know-how to sell clothing and homewares online

July 2014 - Morrisons sells Kiddicare for £2m and reassures shareholders that this figure will be enough to cover all the costs associated with exiting the business

http://www.theguardian.com/business/2011/feb/15/morrisons-buys-kiddicare-seventy-million

http://www.telegraph.co.uk/finance/10967104/Kiddicare-sold-for-2m-to-Endless-private-equity.html

£163m write down, and people say government wastes money

Scarpacci

I think fate has been somewhat unfortunate for Philip Clarke at Tesco. He got handed a failing ship by the much idolised (even still) Terry Leahy and has been taking the slow, but necessary, action to turn the giant tanker of a ship that is Tesco around. I believe his plan to refit stores more quickly and get them back up to scratch, something that was ignored under Leahy, will have the desired effect eventually but in the short-term, ie. now, could be causing further woes for Tesco as these stores are disrupted. It's also interesting that many will have been calling for Tesco to engage more heavily in price cuts (and increased Clubcard offers), but are perhaps not willing to accept the inevitable pressure of profits it's already bringing.

It would be disappointing if he's been thrown overboard as his turnaround plan is in progress, only for it to eventually become clear that it was working. Clarke's other plans for multi-channel were also impressive and I think it will ultimately be a benefit for Tesco that their price cuts have been targeted and restrained. Their various projects to make the best use of space in some of their larger stores, including restaurants/food to go/improved bakeries and even a pizza takeaway in one store, are interesting and don't really show the signs of a corporation stuck in its 90s/00s hypermarket mindset. Where he has failed, and where the new CEO will hopefully improve, is defining what Tesco is and who it's for. They're right to not try morph into an imitation of Lidl or Aldi, but it's not always clear what will differentiate Tesco for the mid-level shoppers who might go to Asda and the higher level shoppers who might go to Sainsbury's or even Waitrose. Tesco's refresh of their finest range shows promise, but it's still a muddled message overall.

The news of a new CEO has given the shares a bounce today, an interesting reaction to an announcement that included a profit warning. Though new blood and new ideas can help, I think it shows some short termism on the part of the market to think Clarke was the problem. It's an interesting move to go with somebody without any retail experience, but he looks to have held an impressive array of jobs at Unilever. Unilever is one of my favourite companies, so I'm interested to see what he brings to the table.

I still personally think Tesco is the supermarket to be invested in and am happy to hold. Its large UK position, international footprint (even when there's still trouble in many of its markets), its more sophisticated online offering and its innovation with the Hudl, its most advanced loyalty scheme and its bank still make Tesco the best of breed, in my view. Sainsbury's a fairly close second. I wouldn't personally go near Morrison's, which I think suffers from more fundamental problems and is, frankly, a supermarket of another age. Morrison's have a lot on their plate trying to defend their position from Lidl/Aldi and catch up with TSCO/SBRY in online and convenience stores.

planteria

quality post Scarpacci.

i think it is very difficult for Tesco to define their 'message' because they are the size and scale that is trying to be all things to all men & women. but i'm not sure that is a problem...they want to offer the quality, premium end, And have a clear value offer too.

i think Morrisons is a much better business than it is given credit for. it is a quality Food Retailer. location leads me to shop at Tesco more often, and i am a Clubcard Points collector.. but the Morrisons nearest to my office is quality: more concise ranges, but in my view they get them right. good quality food, presented well, at fair prices. and they are the most vertically integrated, property-backed play in the sector.

i just wonder is the sentiment going to get even worse for the sector, and that the second highest yield in the 100, at 7.48%, is going to get higher still:search:

Glen_Clark

planteria wrote: »

quality post Scarpacci.

i think it is very difficult for Tesco to define their 'message' because they are the size and scale that is trying to be all things to all men & women. but i'm not sure that is a problem...they want to offer the quality, premium end, And have a clear value offer too.

i think Morrisons is a much better business than it is given credit for. it is a quality Food Retailer. location leads me to shop at Tesco more often, and i am a Clubcard Points collector.. but the Morrisons nearest to my office is quality: more concise ranges, but in my view they get them right. good quality food, presented well, at fair prices. and they are the most vertically integrated, property-backed play in the sector.

i just wonder is the sentiment going to get even worse for the sector, and that the second highest yield in the 100, at 7.48%, is going to get higher still:search:

I do my main food shop at Morrisons so I agree with you. The comment about Morrisons spoiled Scarpacci's otherwise excellent post IMO.
Aldi & Lidl have been here over 20 years so we need to look at whats changed.
The fact is that, as the gap between rich and poor grows wider, all the middle of the road grocers are losing customers at both ends. Some (not all) are getting richer and moving to Waitrose. Whilst Some (not all) are getting poorer and moving to Aldi & Lidl.
PS: I do realise that not every customer in Aldi is poor, and not every customer in Waitrose is rich

TattyBear

Most staff, and no doubt quite a few shareholders, will tell you that the Morrisons has had it unless Dalton Philips is kicked out very quickly. I live in an isolated town where most people know someone who either works or used to work in the local Morrisons which was newly built a few years ago.

Within 6 months of the doors opening, most of the staff they took on had left, and no locals wanted to work in there because the place had the reputation from hell. The main problem that Morrisons has is that it does no trade. No trade equals no staff. No staff equals no customers.

Having been in there once, the place reeked of Sainsburys from about 1980. There was mouldy and out date food on the shelves, only one checkout was open, and people were walking out leaving their trolleys at the checkout. The comment about Morrisons being a supermarket from another age is spot on.

A year go, Morrisons share price was nearly double what it is now. Most of the staff will tell you that Philips is running the company in to the ground so it can be bought for peanuts by his old mates at Loblaw.

planteria

to be honest, i just don't see any of that at all.

in fact, i find that the staff at Morrisons stores that i go in are consistently happier, more helpful and polite that other supermarkets. Edgbaston, Walsall Town, Walsall Fellows Park, Aldridge...i think they're all good:grouphug:

i still think they are ahead of the others with their 'shop within a shop' concept. Tesco don't have staff who are close to them on the deli counter in my area, for example.

Thrugelmir

IronWolf wrote: »

£163m write down, and people say government wastes money

I'm watching a £120 million of technology investment go down the pan. That's merely the software licence costs. Follow the NAO reports. There's huge waste in Government spending policy.

planteria

some interesting comments in the latest St James's Place 'Market Bulletin':

"One of the UK’s most-recognisable corporate names also had a tough week. Philip Clarke was ousted from his post at Tesco, after failing to halt a dramatic slide in sales and profits, and replaced by Dave Lewis, an executive from Unilever with no retail experience. As if to emphasise Mr. Clarke’s lack of popularity, the news caused the share price of Tesco to rise 4% immediately despite being accompanied by a profit warning.

Mr. Clarke, who joined the supermarket as a schoolboy shelf-stacker in 1974, is paying the price for failing to halt a slide in sales and profits during three years in charge. In that time he has spent more than £1billion revamping its UK stores and product ranges, yet failed to stem the tide of shopper defections to rivals. In the statement, Tesco warned that sales and trading profits for the first half of the year "were below expectations" despite a raft of store makeovers and price cuts. When Clarke took over in March 2011 Tesco's UK market share was 30.7%, but today that has shrunk to 28.9%, according to research firm Kantar Worldpanel. During the same period, discounter Aldi has more than doubled in size to command a 4.7% share, while Lidl has increased its stake from 2.5% to 3.6%. The market positions of Sainsbury's and Asda – Tesco's main rivals – have remained largely stable.

As a historically strong dividend-payer with defensive characteristics, Tesco has always been a popular stock within UK pension funds in the past. James De Uphaugh of Majedie Asset Management, offered some comment on a stock he bought near the start of the year. “Many changes under Clarke deserve positive comment. Capital allocation is more rational, corporate governance has improved and disclosure is more forthcoming. However, the appointments of Dave Lewis from Unilever as CEO and Alan Stewart from M&S as CFO represent a step forward.

We expect two initiatives from the new management team. Firstly, assets must be sold to reduce leverage, secure the dividend and refocus management on the UK. Secondly, a wholesale renegotiation of terms with branded suppliers should be sought. Some discounters are selling branded food at prices 20-25% below Tesco. Reviewing the range and forcing better terms, perhaps by reducing the number of suppliers, is a critical ingredient to stabilising the business.”

Nick Purves of RWC Partners, agrees with the positive prospects for the company, but is looking extremely longterm with his investment. “Food retailers are being adversely affected by structural changes in consumer habits and increased competition from the budget retailers Asda, Aldi and Lidl. Tesco is struggling in the middle ground between the aforementioned discounters and the quality retailers: M&S, Sainsbury’s and Waitrose.

It has become evident that, for some time now, Tesco has under-invested in its offering and it has become uncompetitive when compared to the 'no frills' offering of the discounters. Following a very long period of steady growth, revenues are now declining and margins are under pressure. Investors should not underestimate the challenges that the company faced and it is likely to take a considerable period of time to turn things around. Additionally, no one should be under any illusion that the company's profitability will return to historic levels any time soon. Having said all of this, we don't believe that the business is fundamentally broken; over time, we think it can reinvent itself to become competitive again albeit at lower levels of profitability. Following the recent fall in the share price, we feel that the price today already incorporates a lot of bad news and would respond well to any turnaround in the company's fortunes.”

http://www1.sjp.co.uk/~/media/Files/S/sjp-group/document-library/bulletins/2014/mmb28072014.pdf

Glen_Clark

The channel 4 programme last night put the REAL cost to the supermarket of an online shop at about £20 :eek:
And they charge the customer what ... £1
No wonder Aldi & Lidl are happy to leave online shopping to their competitors.
What I don't understand is why the big 4 are falling over each other to see who can lose the most money on it, and why people on this forum are criticising Morrisons for getting in late, when in my view they shouldn't be in it at all.
To me it looks like the dot com lunacy all over again.

seven-day-weekend

planteria wrote: »

i was in a fairly new Morrisons store yesterday, and i was, as usual, impressed. i am a foodie..and the store i refer to is very much a food store: not large areas to clothing/household. i think range/quality/price of food are excellent. good stock levels and selection without too much duplication/confusion.
sentiments seems to keep getting worse, and i keep sitting on my hands...but, as a business, i like it.
i'm not quite sure how, but they seem to manage to employ 'nice' people...i go in 3 or 4 stores in various areas, and seem to get better service than in Tesco or Asda.

Yes they do....my son works at Morrisons

We swapped from Asda to Morrisons initially as the carpark at our local Asda is hell! Then we found we much preferred Morrisons so stayed there.

I hope it manages to pick up in the market. They are losing a lot of middle management, so hopefully that will help.