Money continues to cascade out of Tesco, which has just announced that this year’s trading profit will be £1bn less (that’s one billion) than it and analysts thought. They were expecting £2.4bn.
We say ‘cascade’ because the word makes an unexpected appearance in Tesco’s latest trading statement:
In recent weeks we have implemented new policies and procedures which will govern our commercial income activities and taken actions to invest in and improve our customer offer.
In our interim results on 23 October we highlighted that full year profitability would be impacted by actions we may choose to take and that the commercial income overstatement would affect second half results as we revisited our plans with the new management team
Our new Commercial approach will underpin stronger long-term relationships with our suppliers, benefiting customers, whilst at the same time ensuring that revenue recognition is transparent and appropriate. We have retrained our entire team and begun the cascade with our suppliers.
New CEO Dave Lewis,parachuted in from Unilever’s Personal Care division, has produced some admirable plain speaking so far but where on earth did this come from? For a Tesco supplier ‘cascade’ probably means buckets of something unpleasant being poured on them: weird.
Lewis, who has promised to update the market further on January 8, seems to have set his face against doing anything dramatic; saying there won’t be an emergency rights issue. He’s yet to say if Tesco will dispose of any businesses; stores overseas or things like Blinkbox (which wouldn’t bring in much money) or its banking operation, which would.
He says he’s hired 6000 more staff, which is a move in the right direction although not that many when you consider the size of the Tesco estate, and is putting money into price cuts – which he had to do. He’s also taken over the running of Tesco’s UK stores himself. Again he probably had no choice as many of the company’s former senior executives are suspended or have been dismissed.
It will be fun for us (although not for them, of course) when the claims for unfair dismissal surface. That’s when the full story of the Phil Clarke years (and maybe the Terry Leahy years) will come to light.
In the meantime, no word as yet of any agency review out of Wieden+Kennedy although some gossips are suggesting that WPP’s Grey and Ogilvy (a big Unilever agency) are both sniffing around the account. WPP boss Sir Martin Sorrell certainly will be.
But W+K has produced a perky set of Christmas ads for Tesco, concentrating on Tesco-related events rather than the stores themselves, which looks a smart choice in the current dire circumstances.
‘Don’t panic’ seems to be Lewis’s motto and, so far anyway, he doesn’t sound like Dad’s Army’s Corporal Jones. A decent trading Christmas is what both he and his agency need. If they don’t get one it will be a rush for the lifeboats.