EVEN the mighty cannot get their own way all of the time. Supermarket giant Tesco will be forced to admit this week that its expansion into America is on hold and growth at home is slowing.
Some would argue that it is normal practice for any foreign adventurer to pause for breath after an initial burst of activity, but Tesco never hinted at the need to put the brakes on its Fresh & Easy stores programme. When it announces group year-end
results this week it is likely to confirm that it is taking a three-month rest from its roll-out plans.
The news first leaked some weeks ago via a blog by Fresh & Easy's marketing director, Simon Uwins, and investors took a dim view of prospects, marking the shares down 4.3%, a situation compounded by Tesco's refusal to reveal details of performance in the first five months of trading. Tesco has built a huge distribution store in the US to service just 59 stores, though it is inevitable that once the wrinkles are smoothed out, as Uwins indicated in his blog, the roll-out programme will resume, unless, of course, there are underlying problems in the US that we don't yet know about. Tesco would not be the first British company to run into difficulties trying to replicate its model across the Atlantic and its timing could not have been worse, given the downturn in US consumer confidence.
However, Tesco's problems may also be of its own making. US analysts point to its insistence on promoting own label goods to a middle-class, health-conscious consumer, which puts it in the Lidl and Aldi arena. It may work if it was under the Tesco brand, but Fresh & Easy is a new concept which will take time to find its way.
For Sir Terry Leahy, the chief executive with the supermarket midas touch, this is a rare setback. While he has been planning his transatlantic assault, he will also have been bruised by the gains in UK market share by a rejuvenated William Morrison, which enjoyed a particularly good Christmas. Tesco's post-Christmas trading update showed that it missed analysts' forecasts.
The group's annual figures will show a 15% rise in pre-tax profits to £2.8bn, or £5,327 a minute, but the growth story is faltering and Leahy has work to do at home and overseas.
Will BAA pay the price for turbulence?IT LOOKS like airports operator BAA has lost the latest round in the scrap with British Airways over who was to blame for the fiasco at Heathrow's Terminal 5. Tessa Jowell, the minister for London, has accused BAA of damaging the capital and says it must take responsibility for the economic cost.
It's not clear if she thinks BAA should compensate BA for the £16m losses it has incurred, mainly due to the shambolic baggage handling system, but the wider economic cost to London and to Britain overall is a more important issue.
It may be a difficult sum to calculate, but it is easy to see that it has undermined the country and London in particular in the eyes of the world. It is perfectly understandable for overseas visitors to opt for other airports either as their UK landing spot or for connections elsewhere.
BA, however, is not off the hook. Confirmation that it will delay transferring long-haul flights to the new terminal from April 30 until June has angered other airlines which are due to take over slots at Terminal 4. It puts another dent in passenger and investor confidence.
To make matters worse, BA chief executive Willie Walsh cannot give a precise date for the switch, causing more uncertainty to all concerned.
Walsh insists he won't resign, but with pressure on the dividend adding to his troubles, he needs a quick upturn in fortunes to restore his credibility.
High street looking more like road to hellIF THERE is one thing uniting those knights of the retail round table, Sir Philip Green and Sir Stuart Rose, it is the gloom surrounding the high street. Green, the Bhs and Top Shop billionaire, describes the situation as "ugly" and reckons some retailers will not survive. Rose, who is also embroiled in a showdown with investors over his elevation to executive chairman of Marks & Spencer, predicts a two-year slump.
This is an important sector in Britain, employing 10% of the workforce, and redundancies are hanging over it. We predicted mergers at the turn of the year and there are tentative talks involving Co-op, Somerfield and Woolworths. The high street is due its biggest shake-up for some time.
The full article contains 789 words and appears in Scotland On Sunday newspaper.
