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Why I Hate Tesco Plc

There is something to love and hate in almost every stock. But today, I’m in an irritable mood, so here are five things I really hate about Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US).

I hate the fact that I own it

True confession: I hold Tesco. In fact, I’ve had a love/hate relationship with the UK’s largest supermarket for years. When I hold it, I have an urge to sell. Once I’ve sold, I feel the need to own it again, because it’s just too big to ignore. Last time I bought it was in November 2012, when the share price was in the doldrums. It is up 15% since. So yes, I am even making money from it. But I still don’t really like it. Why? Because…

Tesco has had its day

Tesco is still king of the high street, with a 30.2% share of the market (down from 30.9% one year ago). Second-placed Asda can only muster 17.1% and J Sainsbury has 16.4%. If Tesco was a country it would still be the global hyperpower, but it is showing signs of imperial stretch, following the £1.5 billion failure of Fresh & Easy in the US, and faltering progress in China, where it hasn’t turned a profit after a decade. Tesco still has the might, but it no longer seems right.

It has stopped believing in itself

Everybody believed in retail genius Sir Terry Leahy, who made Tesco what it is today, and stepped down in 2011. No longer. His predecessor and mentor Lord MacLaurin publicly attacked Sir Terry in June, claiming he had “lost the plot”. That loss of self-belief is reflected throughout the company, which has shelved plans to build more than 100 superstores and sold off the land, and admitted that its big box retail stores were an alienating experience. Will family friendly restaurant chain Giraffe and artisan coffee shop experience Harris + Hoole polish up Tesco’s image, or will Tesco drag them down to its level? I fear the latter.

The world has moved on

At the peak of its popularity, Tesco wasn’t actually that popular. People shopped there because it was cheap. Eventually, many tired of being told to BOGOF, and decamped to upmarket Waitrose or cheap rivals Aldi and Lidl. Tesco has been the bully on the block for too long, trampling over local shops and opposition groups. It will take a lot to brush up its image.

Tesco has been a lousy investment

Tesco’s share price has grown just 0.19% in the past five years. Over two years, it has returned 0.45%. Over six months, 0.29%. Do you think it can turn that round, as its customers get poorer, and prices continue to rise faster than wages? There is also the disturbing notion Amazon will one day start selling food. Amazon has already thrashed Tesco at home electronics. Who would bet against it winning a food fight? Still, at least Tesco is cheap, at 10.3 times earnings. But as you can see, there is a reason for that.

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> Both Harvey and The Motley Fool own shares in Tesco