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

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PMQs review: Jeremy Corbyn prompts Tory outrage as he blames Grenfell Tower fire on austerity

To Conservative cries of "shame on you!", the Labour leader warned that "we all pay a price in public safety" for spending cuts.

A fortnight after the Grenfell Tower fire erupted, the tragedy continues to cast a shadow over British politics. Rather than probing Theresa May on the DUP deal, Jeremy Corbyn asked a series of forensic questions on the incident, in which at least 79 people are confirmed to have died.

In the first PMQs of the new parliament, May revealed that the number of buildings that had failed fire safety tests had risen to 120 (a 100 per cent failure rate) and that the cladding used on Grenfell Tower was "non-compliant" with building regulations (Corbyn had asked whether it was "legal").

After several factual questions, the Labour leader rose to his political argument. To cries of "shame on you!" from Tory MPs, he warned that local authority cuts of 40 per cent meant "we all pay a price in public safety". Corbyn added: “What the tragedy of Grenfell Tower has exposed is the disastrous effects of austerity. The disregard for working-class communities, the terrible consequences of deregulation and cutting corners." Corbyn noted that 11,000 firefighters had been cut and that the public sector pay cap (which Labour has tabled a Queen's Speech amendment against) was hindering recruitment. "This disaster must be a wake-up call," he concluded.

But May, who fared better than many expected, had a ready retort. "The cladding of tower blocks did not start under this government, it did not start under the previous coalition governments, the cladding of tower blocks began under the Blair government," she said. “In 2005 it was a Labour government that introduced the regulatory reform fire safety order which changed the requirements to inspect a building on fire safety from the local fire authority to a 'responsible person'." In this regard, however, Corbyn's lack of frontbench experience is a virtue – no action by the last Labour government can be pinned on him. 

Whether or not the Conservatives accept the link between Grenfell and austerity, their reluctance to defend continued cuts shows an awareness of how politically vulnerable they have become (No10 has announced that the public sector pay cap is under review).

Though Tory MP Philip Davies accused May of having an "aversion" to policies "that might be popular with the public" (he demanded the abolition of the 0.7 per cent foreign aid target), there was little dissent from the backbenches – reflecting the new consensus that the Prime Minister is safe (in the absence of an attractive alternative).

And May, whose jokes sometimes fall painfully flat, was able to accuse Corbyn of saying "one thing to the many and another thing to the few" in reference to his alleged Trident comments to Glastonbury festival founder Michael Eavis. But the Labour leader, no longer looking fearfully over his shoulder, displayed his increased authority today. Though the Conservatives may jeer him, the lingering fear in Tory minds is that they and the country are on divergent paths. 

George Eaton is political editor of the New Statesman.

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