Tesco Forum

brutal!

now 2% down

opened 1% up

check the FTSE out

wow this is dropping rapid

Asda reported a rise in profits

Going down

The other smoking gun is interest rates. Tesco are operating with c£6bn of debt...refinancing this should rates rise will be pretty much disastrous

Tesco's problems are permanent and structural. Many commentators attribute their historic success to Clubcard. This is confusing cause and effect. Tesco performed because they created a much bigger national footprint than their competitors. Today they have about 3x more stores than JS or Asda. The trouble is they expanded via bricks and mortar. the success of their own on line business shows how unnecessary these fixed assets are today. So they are being attacked from all sides. Their international business outside Asia has been a litany of failure. And now at home Aldi and Lidl with deep private pockets are expanding stores rapidly, Walmart (asda) are coming into Tesco's Southern heartland..remember that every time a new non Tesco store opens, roughly 30p of every £1 they take, comes straight from Tesc. So Tesco are too big to buy anything else. They are saddled with a huge property portfolio and because of sale and lease back arrangements, used to release cash to fund international expansion, they are also facing a staggering annual rental bill. They are under price and margin squeeze and despite calls from some quarters to cut prices more aggressively...those calls feel like medieval barbers calling for a bloodletting. Asda, Aldi, Lidl are in for the long game and have very deep pockets and aren't reporting figures every quarter. Tesco failings today were yesterday's strengths and sadly a few Manchester United football shirts from Mike Ashley isn't fixing this any time soon. The best hope for shareholders is a China-led takeover of Tesco. All this bad news, and I hadn't even got around to mentioning Amazon or Alibaba.

Is it possible that Aldi and Lidl will take over tesco in the next number of years? Sounds like a mad idea, but if things continue as they are, why not.