Tesco Shareholders Slam Bosses' 'Madness' Amid Declining Fortunes

'Has The Madness Got That Bad At Tesco?'
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Tesco shopping bags are carried in London, Tuesday, April 21, 2009. Tesco PLC, Britain's largest retailer has reported full-year profits rose 2 percent to 2.17 billion pounds (US$3.15 billion) despite higher than expected losses on its fledgling U.S. venture. (AP Photo/Kirsty Wigglesworth)
ASSOCIATED PRESS

Tesco's senior executives faced shareholders today in an ill-tempered encounter that saw them accused of "arrogance" and being "delusional" as the supermarket giant fights to turn around its ailing fortunes.

The clash came at the supermarket's annual general meeting in central London, which was hit by protests outside, which took place on the same day that the Guardian reported that Tesco was sitting on enough land to build 15,000 homes.

The first shareholder to ask executives a question, Anthony Lee, railed at the supermarket giant's "arrogance" when it was doing well, warning: "Once you have lost reputation, it is hard to get it back".

"You're not trying to be Madonna or a church," he told them. "You're a supermarket. It's not your job to be loved."

Tesco chairman Sir Richard Broadbent admitted in response that retailers need to show "proper humility" to thrive, but the management was later rebuked for praising predecessor Sir Terry Leahy, under whom Tesco launched a disastrous attempt to get into the American market under the "Fresh & Easy" brand.

"He [Sir Terry] was paid millions for losing billions," another shareholder said. "You congratulate previous management, has the madness got that bad? Leahy lost more than £3bn." He also accused the supermarket's management of having "ruined" staff morale.

Protests at Tesco's 2014 AGM
(01 of03)
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A group of former Tesco lorry drivers who were taken over by Eddie Stobart's company then sacked for cheaper drivers, demonstrate against the supermarket giant while they have their AGM, outside the QEII conference centre in Westminster, central London. (credit:John Stillwell/PA Wire)
(02 of03)
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Amy Bradley from protest group ShareAction demonstrates outside the QEII conference centre, against the below living wage paid to some workers at supermarket giant Tesco, while they have their shareholders AGM inside, the conference centre in Westminster, central London. (credit:John Stillwell/PA Wire)
(03 of03)
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A small group of people from protest group ShareAction demonstrate outside the QEII conference centre, against the below living wage paid to some workers at supermarket giant Tesco, while they have their shareholders AGM inside, the conference centre in Westminster, central London. (credit:John Stillwell/PA Wire)

Tesco chief executive Philip Clarke, who has been under increasing pressure to revive the fortunes of Britain's biggest retailer, told shareholders that the chain was operating in a "new reality" and that "reducing prices doesn't result in an instant sales increase".

The supermarket boss was accused by another shareholder of being "delusional" about his strategy for the chain.

Tesco has become increasingly troubled after it reported that its like-for-like sales had slid 3.7% over the last three months, just weeks after it posted falling profits for the second year in a row.

Discount retailer Lidl used the opportunity of today's Tesco AGM to advertise that it is continuing to thrive, with plans to invest £220 million into 20 new stories in the UK, which will create 2,500 jobs.

However Tesco's executives stayed firm, with chairman Broadbent arguing that getting into a price war against chains like Lidl would be "a strategy for long-term decline".

Tesco recently suffered a new blow after having its credit rating downgraded by Moody's to its second lowest investment grade level.

The supermarket giant's tough trading prompted former supermarket chief Sir Terry Leahy to say earlier this month that he was "very disappointed" by its poor performance.

Six Reasons Tesco's Dominance May Be Finished
Tesco can't shrug off its poor performance(01 of06)
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Clarke blamed the dip in sales on cutting prices, moving away from vouchers and the disruption from refurbishing a large number of stores.However, Bernstein Research's Bruno Monteyne estimates that if you took out such costs, their like-for-like sales would still have dipped by 2%.
Tesco is trying too hard to appeal to everyone (02 of06)
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Discount retailers like Asda specialise in offering good deals, while fancy supermarkets like Waitrose are without equal at providing luxury. So Tesco is trying to be a mix of everything, other customers are lured away by more specialised rivals.
Others are doing what Tesco is trying, but better(03 of06)
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Tesco "has been increasing prices way too fast over the last few years to keep up earnings growth," Monteyne points out.As a result, compared to discount retailers like Asda, Tesco is at least 4% more expensive for shoppers.
1 million fewer customers are visiting a week(04 of06)
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The proof that Tesco is having some issues comes in the footfall, as the chain seems to have lost more than 1 million customer visits a week, worth £25 million in sales.
Tesco has never done this badly (05 of06)
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Clarke, who has worked for 40 years at Tesco, admitted: “I have never seen a quarter’s like-for-like sales like this before, that I can remember."Monteyne told Radio 5 Live the results were "the worst in their history."
Even Tesco's boss isn't confident (06 of06)
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“I see every day the improvements that are coming in the business, but I’m not making any promises about sales improving in the next few quarters," Clarke warned today. Meanwhile, other analysts like Julie Palmer at Begbies Traynor think Clarke "doesn't seem to have a clear turnaround strategy". He'll have to work hard to prove them wrong.