Tesco knows what its problems are: it just can't fix them

Today's results were not great.

Despite the profit squeeze suffered in 2012/13, there was a sense that Tesco was on the road to recovery. The end of the financial year had signalled an improving trend, with the implication that the strategy put in place by Chief Executive Phil Clarke was starting to bear fruit. However, these results demonstrate that the view Tesco had put the worst of its troubles behind it was somewhat premature.

The horse meat furore has undoubtedly played a significant role in derailing the improving trend, just as the business was starting to once more gather momentum. Despite only having a small number of affected products, the retailer was very much at the centre of the negative fallout from the scandal. Whereas Sainsbury’s and Morrisons were able to spin the episode into a positive, highlighting their product quality and supply chain transparency, for Tesco it merely raised some awkward questions and damaged shopper perceptions of the Tesco brand.

Indeed, this is reflected in the performance of Tesco’s food categories, where a positive and improving LFL trend was achieved in all food categories bar frozen and chilled convenience foods – in other words, those most associated with the horsemeat contamination. Although the retailer has now taken significant steps to address this, consumer trust is of course much harder to re-build than it is to lose.

With food having hit a hurdle, the ongoing decline of general merchandise becomes more pressing once again. Although clothing remains strong, the exposure of the business to the turbulent consumer electronics sector in particular is a major drag on performance. Tesco’s goal is to shift business from low-margin, low-growth categories to higher-margin, higher-growth categories; an admirable aim but not easy to implement.

In fact, this is the crux of Tesco’s problem; its challenges are much easier to identify than they are to fix. In non-food, for example it will re-launch its range and re-configure space in larger stores, but this will take time to produce significant results. Similarly, attempting to overhaul the consumer experience, whether through more appealing branding or introducing new features, such as restaurants and bakeries, to stores, is the kind of step that takes years, rather than months, to properly execute. Therefore, there could well be a few more bumps in the road to recovery.

Photograph: Getty Images

 Managing Director of Conlumino

SHUTTERSTOCK / MONKEY BUSINESS IMAGES
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The price of accessing higher education

Should young people from low income backgrounds abandon higher education, or do they need more support to access it? 

The determination of over 400,000 young people to go into higher education (HE) every year, despite England having the most expensive HE system in the world, and particularly the determination of over 20,000 young people from low income backgrounds to progress to HE should be celebrated. Regrettably, there are many in the media and politics that are keen to argue that we have too many students and HE is not worth the time or expense.

These views stem partly from the result of high levels of student debt, and changing graduate employment markets appearing to diminish the payoff from a degree. It is not just economics though; it is partly a product of a generational gap. Older graduates appear to find it hard to come to terms with more people, and people from dissimilar backgrounds to theirs, getting degrees.  Such unease is personified by Frank Field, a veteran of many great causes, using statistics showing over 20 per cent of graduates early in their working lives are earning less than apprentices to make a case against HE participation. In fact, the same statistics show that for the vast majority a degree makes a better investment than an apprenticeship. This is exactly what the majority of young people believe. Not only does it make a better financial investment, it is also the route into careers that young people want to pursue for reasons other than money.

This failure of older "generations" (mainly politics and media graduates) to connect with young people’s ambitions has now, via Labour's surprising near win in June, propelled the question of student finance back into the spotlight. The balance between state and individual investment in higher education is suddenly up for debate again. It is time, however, for a much wider discussion than one only focussed on the cost of HE. We must start by recognising the worth and value of HE, especially in the context of a labour market where the nature of many future jobs is being rendered increasingly uncertain by technology. The twisting of the facts to continually question the worth of HE by many older graduates does most damage not to the allegedly over-paid Vice Chancellors, but the futures of the very groups that they purport to be most concerned for: those from low income groups most at risk from an uncertain future labour market.

While the attacks on HE are ongoing, the majority of parents from higher income backgrounds are quietly going to greater and greater lengths to secure the futures of their children – recent research from the Sutton Trust showed that in London nearly half of all pupils have received private tuition. It is naive in the extreme to suggest that they are doing this so their children can progress into anything other than higher education. It is fundamental that we try and close the social background gap in HE participation if we wish to see a labour market in which better jobs, regardless of their definition, are more equally distributed across the population. Doing this requires a national discussion that is not constrained by cost, but also looks at what schools, higher education providers and employers can do to target support at young people from low income backgrounds, and the relative contributions that universities, newer HE providers and further education colleges should make. The higher education problem is not too many students; it is too few from the millions of families on average incomes and below.

Dr. Graeme Atherton is the Director of the National Education Opportunities Network (NEON). NEON are partnering with the New Statesman to deliver a fringe event at this year's Conservative party conference: ‘Sustainable Access: the Future of Higher Education in Britain’ on the Monday 2nd October 2017 from 16:30-17:30pm.