Quite an eye catching headline - and entirely accurate. Yestarday in just one day Tesco lost £5bn. That is the companies value fell by £5bn. Quite a shocking figure which comes on the back of quite a shocking performance over the christmas period. While Tescos LFL (Like for like - so just comparing stores that have been open for over a year) fell in the UK by 2.3%, while it's competitors, Sainsburys for example rose by 2.1%. Given that we have had a decade or so of phenomonal growth from Tesco these results represent a shock to the markets thus the share sell of resulting in the £5bn loss.
I have frequently spoken on Tesco - here & in other forum. They have made a number of key mistakes in my mind and have confused their position in the market. They are giving away too much profit margin through promotion & loyalty incentives, and are rather stuck in the middle between Asda who is unquestionably perceived to be cheaper & Sainsburys who is generally perceived to be better. They seem to want to grow by adding more and more small format stores but there is growing local resentment to the perceived domination of Tescos in some areas leading customers to actively seek alternatives where possible. I cannot see that Tescos will again grow their market share in the UK & rather see them stagnating for many years around the 30% mark.
Friday 13 January 2012
Monday 2 January 2012
Happy New Year & Contagion
Firstly Happy New Year to readers,
I have often spoken on here how our the fate of the UK economy depends so much on it's European partners. Nothing demonstrates this more graphically than the interactive chart here - http://www.bbc.co.uk/news/business-15748696
If you take a look at Greece for example it's government debt to GDP ratio is stated here as 166% - clearly a huge figure, but what you can also see is that French banks have lent the most to Greece - some 41.4bn euro. Of course if Greece were to default on it's debt (declare that it cannot pay it back) then French banks would loose a large part of this 41.4bn euros & many would then need further government help to maintain their solvency.
Meanwhile with such large debts, Greece cannot affordably borrow on the international money markets (as they are seen to be so risky the rate of interest charged would be unaffordable) the only way that Greece can maintain a deficit is through continued bailouts (other countries making benevolent loans).
How did we allow ourselves to get into such a mess where we are all interdependent on each others fate - well in my view the single euro currency covering such a diverse range of countries from Greece to Germany. How can one common exchange rate & interest rate be correct for such a mix of countries?
I have often spoken on here how our the fate of the UK economy depends so much on it's European partners. Nothing demonstrates this more graphically than the interactive chart here - http://www.bbc.co.uk/news/business-15748696
If you take a look at Greece for example it's government debt to GDP ratio is stated here as 166% - clearly a huge figure, but what you can also see is that French banks have lent the most to Greece - some 41.4bn euro. Of course if Greece were to default on it's debt (declare that it cannot pay it back) then French banks would loose a large part of this 41.4bn euros & many would then need further government help to maintain their solvency.
Meanwhile with such large debts, Greece cannot affordably borrow on the international money markets (as they are seen to be so risky the rate of interest charged would be unaffordable) the only way that Greece can maintain a deficit is through continued bailouts (other countries making benevolent loans).
How did we allow ourselves to get into such a mess where we are all interdependent on each others fate - well in my view the single euro currency covering such a diverse range of countries from Greece to Germany. How can one common exchange rate & interest rate be correct for such a mix of countries?
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