Hot Features
Premium
Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
It has been barely more than a fortnight since I last wrote about Tesco (LSE:TSCO). At that time – 25 February to be exact, Tesco’s share price was at 335.00. It has since declined 313.45, a loss of 2.2% on the day and a loss of 6.6% over the last two weeks.
Oh How The Mighty Have Fallen
The decline in Tesco’s market share from a high of 31.8% to it’s current 28.7% can be worrisome for fainthearted investors, who anticipate the worst. Four percentage points may not sound like much, but when your company is the world’s third-largest retailer, a 4% market share is quite a pile of pounds. Perhaps the most important thing that Tesco investors need to understand it that the company is not being captained by Francesco Schettino. It is commanded by Philip Clarke, a man who not only knows what it takes to turn a ship around, but actually gets it turned before it hits the rocks.
No Mighty Ship Can Turn on a Dime
In my 25 February story, I tried to make it perfectly clear that Clarke not only has a plan, but that it is a very good plan. Twenty-two months into implementation it has been generating positive results, but public opinion almost always lags behind actual results. It is often little changes that generate the greatest results. Clarke clearly understands that, repeating yesterday what he has been saying all along, that “Bigger isn’t always best. Better is better.” He told the Retail Week conference that his goal is to build the health of the business for the long haul. “Big companies take a long time to change, we have more than 3,000 stores … That takes time.” That right fundamental philosophy has a tendency to alienate some people in the short run, but at the end, all will be impressed. This is not a man who is going to steer Tesco took close to what some would like to see now. No, this is a man who plans to keep the company aright, afloat and shipshape for a long time to come.
Bigger is Almost Never Better
For the better part of 40 years in business, I often stood alone against the concept that “Bigger is better.” I suppose that it is a reasonably motivating battle cry, but it is no more true today than it was in the days of Alexander the Great or Julius Caesar. Bigger is just bigger. Clarke said that, “It’s not about market share in the short or medium term. The industry is going through a most profound change. The only way I can see we can have a sustainable business in this period of change is by creating, innovating and differentiating.”
Compelling Differentiation is the Key
What makes you shop at one retailer as opposed to another? Regardless of who responds to that question, every response can be reduced to one or two compelling reasons that differentiate that retailer from the rest of the field for each individual responder. That is exactly what Clarke means when he says that “It’s not a question about discounters or something else. It’s about doing the right thing for our customers.” When you do the right thing for your customers, everything else works out as the right thing for everyone else.
