Tesco’s top executives won’t get a bonus this year, it confirmed this morning – to rapturous applause from an audience of shareholders. At a shareholder meeting this morning, chairman Sir Richard Broadbent said ‘I take no pleasure in this’, but admitted that because of a slide in sales, senior managers would forgo their incentives.
At the AGM Broadbent also urged investors to 'trust us', saying the 'value of the business in which you hold shares is related to our success in putting the customer first.
'This means tracking indicators of customer satisfaction. And it means understanding that giving primacy to quarterly like-for-like sales does not equate to long-term value creation.'
A croaky Phil Clarke (who pulled out of a British Retail Consortium appearance with a cold on Tuesday) explained that the supermarket is at the ‘fourth major point in its history’ (the others being the launch of self-service, out of town and expansion overseas). Although he called it ‘exhilarating’, he added the business needs to be more cautious about expansion overseas, saying it needs to be ‘disciplined’ about the way it grows.
Former chairman Lord MacLaurin blamed former chief executive Sir Terry Leahy for the state of the company, saying his legacy is 'sad', and asking the board to give Clarke time to turn around the business. 'It will take two to three years to improve', he warned.
One of Tesco’s problems is its focus on ‘discretionary’ products – electronics and clothes and homewares – that consumers cut back on when times are lean. That problem could be about to be solved (in part) by sportwear retailer Sports Direct, which is apparently in talks with Tesco to take over the running of the mezzanine floors at its Extra stores.
A deal with Mike Ashley, Sports Direct’s outspoken owner, would be ideal for Tesco. Earlier this year Clarke scrapped 100 major store development projects, saying the ‘space race’ between supermarkets is over.
By allowing Sports Direct to take over space in Tesco stores, it would mean it could further reduce the amount of square footage it has to fill, without forcing it to downsize its stores. It’s an experiment that’s already worked in the Czech Republic: Tesco has cut its average supermarket size from 80,000 sq ft to 50,000 sq ft by allowing Sports Direct to fill space.
Not bad – or není to špatné, as they say in Czech.
- Want to know more about Phil Clarke? Read this month's MT interview with him here