A victory for Asda in its ongoing 'who's the cheapest' row with Tesco: the latter has been forced to pull its latest ad campaign after the Advertising Standards Authority agreed with Asda that the ads contained ‘ambiguous and misleading’ claims about Tesco's prices. Tesco also saw its shares take a hit after City analysts suggested its accounting practices weren't quite as stringent as some of its rivals, meaning their profit figures weren't really comparable. A couple more things for the in-tray of incoming boss Philip Clarke, perhaps...
The precise details of this latest squabble made our head hurt, to be honest, but basically it concerned two ads in which Tesco boasted about how much cheaper it was than Asda. There was a press ad showing a stack of Asda baskets next to a taller stack of Tesco baskets (which said that on a particular day, shopping was cheaper for more than a million Tesco customers), and a TV ad featuring a similar boast plus a plug for a special offer on pork, biscuits and toilet tissue, with a voiceover saying these were 'just three of hundreds of special offers in store each week'. Asda complained that the claims were misleading because Tesco was comparing apples with oranges (possibly literally): only 12,000 of the 31,000 items listed on Tesco.com were actually stocked by Asda, so it was an unfair comparison.
Naturally Tesco begged to differ, suggesting (inter alia) that more than half of the items bought in the transactions in question were matched. But it clearly wasn't enough to convince the ASA, which – presumably heaving a great sigh and pondering the momentous consequences for the future of humanity – ruled that Tesco hadn’t made it clear whether it was comparing ‘half the contents of each basket, half the total purchases or half the lines they stocked’. Losing the will to live yet?
Anyway perhaps the more signficant development today – at least as far as Tesco's share price was concerned – was a note from investment bank Citigroup suggesting that its accounting practices are far more aggressive than the other big supermarkets. Citi claims that its assumptions on bean-counter stuff like revenue recognition, depreciation and pension accounting are much more generous than other supermarkets – and if you actually enforced the standards used by the rest of the industry, last year's pre-tax profit would actually have been £2.6bn, not the reported £3.4bn. 'Tesco may look like it is moving forward, but we are not inclined to take appearances at face value,' said Citi. We have no idea whether this is true, but it's certainly food for thought for soon-to-be boss Clarke...
In today's bulletin:
'Massive spending cuts lead to massive job cuts' shock
HMV sees profits jump after mixing it up
Tesco slammed over advertising - and accounting
Well-oiled rogue trader gets £72,000 fine from FSA
The Sharp End: High on his own supply