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Every little helps but is it enough?

Friday, October 10, 2014 - 02:34

Tesco's appointment of two new board members is among its latest defensive moves to reassure investors, but it's still reeling from an accounting scandal and a downturn in trading that's knocked £4 billion off its market value in a few weeks. Will the flagship brand weather the storm? Hayley Platt reports.

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Three profit warnings One accounting scandal. And four billion pounds wiped off the value of Tesco shares. An expensive shopping list and a serious blow to the company's brand. CMC Market's Michael Hewson believes Tesco shares are stable for now but its recovery will be slow. SOUNDBITE: Michael Hewson, Market Analyst, CMC Markets, saying (English): "The retail food space in the UK has changed quite markedly from where it was two years ago. Levels of £4 share price is way in the past. How Tesco reacts to this new reality I think is going to be key in the context of how the company turns itself around." New boss Dave Lewis hasn't wasted any time getting to work. He's already appointed two new non-executive directors to the team. And put plans to build new superstores on hold for now. But what about the damage to the brand's reputation? Robert Haigh is from Brand Finance. SOUNDBITE: Robert Haigh, Brand Finance, saying (English): "Tesco had developed a reputation for over extension and the idea was that they'd had a loss of focus and they'd explored into America and they'd developed the brand in too many different areas and this really reinforces that perception that not only did they not have a control over their brand architecture but they can't even work out where their profits are or aren't.'' It may be some time before it can win back the trust of consumers and the supermarket sector is facing a difficult time generally. Tesco's grew rapidly through the 1990s and 2000s, offering low prices. Then in response to falling sales in the economic downturn it put them up again. But with competition from the likes of budget brands Aldi and Lidl, analysts believe cutting them again is the only way to get back in the game, especially ahead of the lucrative Christmas season. Reuters James Davey. SOUNDBITE: James Davey, Retail Correspondent, Reuters, saying (English): "Tesco does need a good Christmas but it's going to be up against it. It's going into sales at a run rate of about -6 percent like-for-like so it's really struggling at the moment. If it cuts prices it might make a short term impact but the worry is that all the accounting issues that are going on at the moment will be a distraction for the management and that it will suffer quite badly." Tesco has plenty on its plate. And its troubles are far from over. Lewis is expected to give un update on the investigation into the accounting issue on October 23. And its Chairman Richard Broadbent is reportedly considering stepping down from the post he's held for the last three years.

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Every little helps but is it enough?

Friday, October 10, 2014 - 02:34