Tesco (LSE: TSCO) has just endured a miserable quarter, its worst in 40 years. But I’m not worrying about Tesco today (I’ve done enough of that lately). I’m far more concerned about another of the so-called big four. Because if these figures were terrible for Tesco, they were a disaster for rival WM. Morrison Supermarkets (LSE: MRW) — and now the latter’s chairman is standing down.
Tesco’s 3.8% drop in like-for-like sales excluding fuel looks like a blip against Morrisons’ 7.1% sales drop. The Morrisons share price fell 3% on the news, while Tesco’s actually rose 2%. Morrisons makes Tesco look good.
Tesco may be losing share, but it is starting from a dominant position. It has 29% of the market, down from 30.5% one year ago, according to latest figures from Kantar Worldpanel. That’s a drop of 3.1%. Morrisons now holds a meagre 10.9% of the market, down from 11.6% one year ago, a fall of 3.9%. These are desperate figures for both supermarkets, but Morrisons still wishes it was Tesco.
Size Does Matter
Tesco is still the one to beat, the third largest retailer in the world, after Walmart and Carrefour. It has the financial clout to “refresh” 200 of its stores in the first half of this year. Morrisons, by comparison, looks beaten.
Better still, Tesco retains a dominant presence in the wealthiest parts of the UK, London and the South East, while Bradford-based Morrisons is pressed back into poorer northern areas. Tesco has won plaudits for its £1 Click & Collect one-hour delivery slots, part of its multi-channel offering, and surprised the market with its halfway decent budget-priced tablet Hudl.
Morrisons is still struggling to get its online and convenience shopping channels up to speed. Its Love It Cheaper campaign has only accelerated the race downmarket. And now its chairman Ian Gibson has said he will quit, rather than seek re-election at next year’s annual meeting. Clarke is able to cling on, for now, despite today’s call by Robert Talbut, fund manager at Royal London Asset Management, for him to go.
More Reasons To Fear Morrisons
Tesco customers clearly aren’t happy, complaining about lengthening queues, dwindling Clubcard values, demoralised staff and scruffy ‘Extra’ stores. They feel lost in an ever-changing blizzard of BOGOF and multipack discounts. Shopping at Tesco feels like a chore.
Morrisons customers aren’t happy either. Reading online threads, the same complaints emerge: “Stuck in the 1980s”, “full of yellow balloons and stickers, and price cuts on things we don’t buy”, “queues despite being few punters”, “management arrogant and out of touch”. These anecdotal, below-the-line grumbles are reflected in the headline sales.
Germany Calling
The big problem facing both supermarkets is public perception. The same customers who complain about scruffy stores and distracted staff delight in cheap and cheerful when visiting Aldi and Lidl. We have higher expectations of the big four.
At the same time, shoppers aren’t stupid. Aldi is regularly praised for offering surprising quality, given the prices. Once people get over their initial snobbery, it’s hard to lure them back.
Tesco and Morrisons are at the sharp end of a dramatic shift in the way we buy our groceries. Both have taken a thumping. If Tesco can’t hack it, how on earth can Morrisons?
