Tesco: just what went so wrong?

Fresh and not so easy.

The big number in today’s results is profit, which is down by a whopping 51.5 per cent on last year. In large part this is down to a series of one-off items, including a write down of the value of the UK property portfolio amounting to some £804m. This in itself is notable as it arises from a decision not to build new stores on more than 100 sites that the company owns and once intended to develop. In essence, this signals the beginning of the end of the grocery space race. Tesco recognises that the opportunity to profitably open new stores is more limited due to both saturation and the continued growth of online. Indeed, its own online sales now stand at over £3bn, up 13 per cent on last year; a clear indication that this, and not new space, is one of the prime drivers of growth going forward.

Profit has also been impacted, albeit to a lesser extent, by a reduction in trading profit. Overall this was down by 13 per cent on last year. This reflects both the refresh activity in new UK stores and also the sharpening of prices. Arguably, both are necessary moves to restore growth to the UK business. Indeed, it can be argued that deterioration in profit to improve stores should rightly be seen as a critical investment that will, over the longer term, pay dividends.

Improvements on the home front

On the home front, while Tesco’s results remain muted there is a sense that the business is now heading in the right direction as the “Build a Better Tesco” strategic plan starts to deliver. While for the full year, LFL sales remain in negative territory there is a clear momentum over the reporting period with a particularly strong performance in quarter 4 (LFLs up 0.5 per cent), which encompasses the all-important festive trading period. Given the scale and maturity of Tesco’s business and the highly competitive state of the market this is a solid underlying performance that indicates that some of the initiatives are now having an impact on consumer behaviour.

Over the next few years, the clear priority in the UK is investment in the customer experience across all channels, but especially in-store. This is something Tesco has been guilty of neglecting in the past and it has damaged customer loyalty, retention and, ultimately, sales. Going forward, given that Tesco’s growth will be much less reliant on opening new space, getting more out of existing stores becomes doubly important. The refreshes, which now number 300 stores and around a quarter of Tesco’s UK selling space, are not necessarily ground-breaking in their thinking but they are a significant step up and provide a more pleasant and engaging shopping experience for the consumer.

The various acquisitions and partnerships Tesco has put in place, including Giraffe, Harris + Hoole and Euphorium bakery, provide a clear indication that it intends to significantly enhance the future in-store experience by introducing strongly branded added-value propositions. Directionally, this thinking is correct and it demonstrates that Tesco clearly understands the importance of providing differentiation over and above competitors, giving its stores more of a destination status, and the increasing importance of leisure within traditional retail.

The incorporation of new initiatives in-store may also help Tesco utilise space more effectively within its larger formats. The latest results clearly indicate the underperformance of non-food, which declined slightly overall and was down by 5% on a LFL basis. Given that clothing has performed strongly, there will be some non-food categories where Tesco has seen a significant deterioration in sales. The market outlook for non-food looks fairly anaemic for the next couple of years, meaning that Tesco would do well to look to reduce the footprint given to some of these categories.

Looking ahead, with the store refresh programme continuing and the re-launch of the flagship Finest brand firmly on the agenda, continued progress from Tesco over the short and medium term should be expected.

The American misadventure

The decision to abandon the Fresh & Easy venture cannot have been an easy one. That it has been made is a credit to CEO Phil Clarke and his team as it underlines their willingness push through the tough measures needed to put the group back on track. While over the longer term Fresh & Easy could have become a profitable venture, it is clear that there were no shortcuts to success and creating a sustainable business was would have required a great deal of time and capital. Arguably, at this point both of these resources are better directed at Tesco’s core business where returns are much more certain and can be delivered over a shorter period of time.

Retail history will likely record Tesco’s American foray as something of an unfortunate misadventure. On paper the Fresh & Easy concept sounded reasonable enough. There was, and to some extent still is, a gap in the local neighbourhood grocery market in the US. However, despite its extensive pre-research, from the get-go Tesco’s execution was off pitch: self service tills did not go down well with a consumer used to high service levels; a lack of vouchering and couponing alienated many price sensitive shoppers; and, an unfamiliarity with ready, convenience meals meant some part of the range were unsuited to local tastes. Soluble as these issues were, they were compounded by a downturn in the market which saw many American consumers turn to tried and trusted grocers, including hypermarkets like Walmart, where they knew they could save money on low price food. These same players also looked to exploit the neighbourhood market with a range of smaller, local formats; exerting pressure on Tesco and undermining its long term vision.

The bottom line is that Tesco probably bit off more than it could chew in the US. As in most mature western economies, to be successful mainstream grocery needs scale and volume. To attain scale and volume requires extensive investment. Given that the Fresh & Easy proposition was suboptimal, Tesco could not be certain that such investment would pay dividends. As such, the inevitably painful decision to cut and run was correct.

Photograph: Getty Images

 Managing Director of Conlumino

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The struggles of Huma Abedin

On the behind-the-scenes story of Hillary Clinton’s closest aide.

In a dreary campaign, it was a moment that shone: Hillary Clinton, on the road to the caucus in Iowa, stopping at a Mexican fast-food restaurant to eat and somehow passing unrecognised. Americans of all political persuasions gleefully speculated over what her order – a chicken burrito bowl with guacamole – revealed about her frame of mind, while supporters gloated that the grainy security-camera footage seemed to show Clinton with her wallet out, paying for her own lunch. Here was not the former first lady, senator and secretary of state, known to people all over the world. This was someone’s unassuming grandmother, getting some food with her colleagues.

It might be unheard of for Clinton to go unrecognised but, for the woman next to her at the till, blending into the background is part of the job. Huma Abedin, often referred to as Clinton’s “shadow” by the US media, is now the vice-chair of her presidential campaign. She was Clinton’s deputy chief of staff at the state department and has been a personal aide since the late 1990s.

Abedin first met Clinton in 1996 when she was 19 and an intern at the White House, assigned to the first lady’s office. She was born in Michigan in 1976 to an Indian father and a Pakistani mother. When Abedin was two, they moved from the US to Saudi Arabia. She returned when she was 18 to study at George Washington University in Washington, DC. Her father was an Islamic scholar who specialised in interfaith reconciliation – he died when she was 17 – and her mother is a professor of sociology.

While the role of “political body woman” may once have been a kind of modern maid, there to provide a close physical presence and to juggle the luggage and logistics, this is no longer the case. During almost 20 years at Clinton’s side, Abedin has advised her boss on everything from how to set up a fax machine – “Just pick up the phone and hang it up. And leave it hung up” – to policy on the Middle East. When thousands of Clinton’s emails were made public (because she had used a private, rather than a government, server for official communication), we glimpsed just how close they are. In an email from 2009, Clinton tells her aide: “Just knock on the door to the bedroom if it’s closed.”

Abedin shares something else with Clinton, outside of their professional ties. They are both political wives who have weathered their husbands’ scandals. In what felt like a Lewinsky affair for the digital age, in 2011, Abedin’s congressman husband, Anthony Weiner, resigned from office after it emerged that he had shared pictures of his genitals with strangers on social media. A second similar scandal then destroyed his attempt to be elected mayor of New York in 2013. In an ironic twist, it was Bill Clinton who officiated at Abedin’s and Weiner’s wedding in 2010. At the time, Hillary is reported to have said: “I have one daughter. But if I had a second daughter, it would [be] Huma.” Like her boss, Abedin stood by her husband and now Weiner is a house husband, caring for their four-year-old son, Jordan, while his wife is on the road.

Ellie Foreman-Peck

A documentary filmed during Weiner’s abortive mayoral campaign has just been released in the US. Weiner shows Abedin at her husband’s side, curtailing his more chaotic tendencies, always flawless with her red lipstick in place. Speaking to the New York Observer in 2007, three years before their marriage, Weiner said of his future wife: “This notion that Senator Clinton is a cool customer – I mean, I don’t dispute it, but the coolest customer in that whole operation is Huma . . . In fact, I think there’s some dispute as to whether Huma’s actually human.” In the film, watching her preternatural calm under extraordinary pressure, you can see what he means.

In recent months, Abedin’s role has changed. She is still to be found at Clinton’s side – as the burrito photo showed – but she is gradually taking a more visible role in the organisation overall, as they pivot away from the primaries to focus on the national race. She meets with potential donors and endorsers on Clinton’s behalf and sets strategy. When a running mate is chosen, you can be sure that Abedin will have had her say on who it is. There’s a grim symmetry to the way politics looks in the US now: on one side, the Republican candidate Donald Trump is calling for a ban on Muslims entering the country; on the other, the presumptive Democratic nominee Hillary Clinton relies ever more on her long-time Muslim-American staffer.

Years before Trump, notable Republicans were trying to make unpleasant capital out of Abedin’s background. In 2012, Tea Party supporters alleged that she was linked to the Muslim Brotherhood and its attempt to gain access “to top Obama officials”. In her rare interviews, Abedin has spoken of how hurtful these baseless statements were to her family – her mother still lives in Saudi Arabia. Later, the senator and former Republican presidential candidate John McCain spoke up for her, saying that Abedin represented “what is best about America”.

Whether senior figures in his party would do the same now remains to be seen.

Caroline Crampton is web editor of the New Statesman.

This article first appeared in the 26 May 2016 issue of the New Statesman, The Brexit odd squad