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

Photo: Getty
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Why gay men love this photo of Prince George looking fabulous

It's not about sexuality, but resisting repressive ideas about what masculinity should be.

Last week’s royal tour by the Duke and Duchess of Cambridge provided the most intimate view of the young family to date. Throughout the five-day visit to Poland and Germany, it was the couple’s adorable children who stole the spotlight.

As George and Charlotte become better acquainted with a world in which everyone recognises them, this level of public scrutiny is something that will no doubt have to be carefully managed by the family.

But there is one particular image from the trip that has both captured people’s hearts and prompted debate. On the eve of his fourth birthday, Prince George was invited behind the driver’s seat of a helicopter in Germany. Immaculately dressed in a purple gingham shirt neatly tucked in to navy shorts, the future King is pictured staring out of the helicopter in awe.

As a man who was visibly gay from a young age, the distinctly feminine image of George smiling as he delicately places his hands on his face instantly struck a chord with me. In fact, an almost identical photograph of five-year-old me happily playing in the garden is hung on my parents' kitchen wall. Since the photos appeared online, thousands of other gay men have remarked that the innocence of this image reminds them of childhood. In one viral tweet, the picture is accompanied by the caption: “When mom said I could finally quit the soccer team.” Another user remarks: “Me walking past the Barbies at Toys ‘R’ Us as a child.”

Gay men connecting this photograph of Prince George with their childhood memories has been met with a predictable level of scorn. “Insinuating that Prince George is gay is just the kind of homophobia you’d be outraged by if it was you," tweets one user. “Gay men should know better than that. He is a CHILD," says another.

Growing up gay, I know how irritating it can be when everyone needs to “know” your sexual orientation before you do. There are few things more unhelpful than a straight person you barely know telling you, as they love to do, that they “always knew you were gay” years after you came out. This minimises the struggle it took to come to terms with your sexuality and makes you feel like everyone was laughing at you behind your back as you failed to fit in.

I also understand that speculating about a child's future sexual orientation, especially from one photograph, has potential to cause them distress. But to assume that gay men tweeting this photograph are labelling Prince George is a misunderstanding of what we take from the image.

The reaction to this photo isn’t really about sexuality; it’s about the innocence of childhood. When I look at the carefree image of George, it reminds me of those precious years in early childhood when I didn’t know I was supposed to be manly. The time before boys are told they should like “boy things”, before femininity becomes associated with weakness or frivolity. Thanks to a supportive environment created by my parents, I felt that I could play with whichever toys I wanted for those short years before the outside world pressured me to conform.

Effeminate gay men like me have very specific experiences that relate to growing up in a heteronormative world. It is incredibly rare to see anything that remotely represents my childhood reflected in popular culture. This image has prompted us to discuss our childhoods because we see something in it that we recognise. In a community where mental illness and internalised homophobia are rife, sharing memories that many of us have suppressed for years can only be a good thing.

People expressing outrage at any comparisons between this image and growing up gay should remember that projecting heterosexuality on to a child is also sexualising them. People have no problem assuming that boys are straight from a young age, and this can be equally damaging to those who don’t fit the mould. I remember feeling uncomfortable when asked if my female friends were my girlfriends while I was still in primary school. The way young boys are taught to behave based on prescribed heterosexuality causes countless problems. From alarmingly high suicide rates to violent behaviour, the expectation for men to be tough and manly hurts us all.

If you are outraged at the possibility that the future king could perhaps be gay, but you are happy to assume your son or nephew is heterosexual, you should probably examine why that is. This not only sends out the message that being gay is wrong, but also that it is somehow an embarrassment if we have a gay King one day. Prince William appeared on the cover of Attitude magazine last year to discuss LGBT bullying, so we can only hope he will be supportive of his son regardless of his future sexuality.

Whether Prince George grows up to be heterosexual or not is completely irrelevant to why this image resonates with people like me. It is in no way homophobic to joke about this photograph if you don't see a boy being feminine as the lesser, and the vast majority of posts that I’ve seen come from a place of warmth, nostalgia and solidarity. 

What really matters is that Prince George feels supported when tackling the many obstacles that his unique life in the spotlight will present. In the meantime, we should all focus on creating a world where every person is accepted regardless of their sexual orientation or gender identity, because clearly we’ve got some way to go.