Tesco’s turmoil

Store’s £500m profits warning

HOW TIMES change. Tesco’s financial fortunes – the supermarket issued a £500m profits warning yesterday – could not offer a greater contrast with the countdown to previous Christmases which were dominated by high street institutions going to the wall because they could not compete with the major outof-town superstores and the retail industry’s changing dynamics.

Now it is Tesco which is paying a heavy price for an expansion programme which has seen the firm lose touch with the most important people of all – its customers. It is a salutary lesson which is likely to have long-term repercussions as consumer-savvy shoppers take advantage and look for outstanding value for money and service.

Even though Tesco still constitutes a British success story and is responsible for employing tens of thousands of staff, it is unlikely to regain the dominance that it enjoyed a decade ago. Shoppers are far more discerning – their loyalty has to be earned – and this means that Tesco, and its rivals like Morrisons, are going to have to adapt their business models.

The worry is that the pursuit of profits by the major supermarkets is likely to see them exert even greater pressure on their suppliers to cut costs, Yorkshire’s dairy farmers being a prime example. This must not be allowed to happen. For, despite the profits warning, Tesco is still a profitable business and can afford to pay the going rate for a pint of milk.