Author: EricBBigham , Last Modified, 2022-01-03 Category: finance Keywords: TESCO-IS-OVERVALUED-My-Rant-on-TESCO..-If-its-not-good-enough-for-Ackman-its-not-good-enough-for-me.-But-dont-take-my-word-for-it,-Ive-just-shopped-there-for-twenty-years-and-now-I-cant-even-taste-the-food!
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So, I was shopping as usual at my local Tesco store, and it must have been the fourth visit that the same thing happened. I could not find my "Tesco Finest" Orange Juice, with Juicy Bits! I visited the store at various times and concluded this was no accident. Something was wrong with Tesco. It just wasn't right.
Having been a customer of Tesco for many years, I was obviously a tad disappointed in the general quality of the store experience. The rather pleasant staff in store assured me on each visit that the product was not discontinued, yet none could produce a single bottle of the good stuff.
I noticed at about the same time a gradual switch to the cheap and nasty stuff, a thick and viscous looking product, the sort you wouldn't drink undiluted, and I'm not talking water.
Tesco appeared to be seriously underperforming, at least to my personal expectations of a great Tesco store. I don't expect a fancy experience at Tesco, but once they hook you on a decent product, I at least expect them to deliver, as in stock it for goodness’s sake.
Sadly, I started to take notice of the general lack of taste in their fruit, oranges, and grapes devoid of any discernible flavour, so much so that I started shopping at Sainsbury's and M&S simultaneously to compare, after all it could have been a problem with my taste buds.
Thankfully however my taste buds proved fine. M&S fruit seemed sweet and juicy by comparison, and for not a significant price difference I might add.
That was it, as ever when I spot a problem with customer service I like to delve further as there is a causation link between customer experience and financial performance... A cursory glance at the headlines and I discovered a story that seemed to explain my experience, at least in part.
Tesco was apparently in massive difficulty, the Chair and most of the board had been fired, the stock price had tumbled, and Dave Lewis was drafted in to lead the turnaround.
Good luck to him I say, he'll no doubt need it. Always interested in spotting a bargain I was hoping to take advantage of a possible turnaround in share price if the business proved to be undervalued. My preliminary valuation however revealed that far from representing an investors bargain, Tesco was still overvalued, and at least to my mind would have to fall quite a bit before I would touch the stock with a barge pole.
I later discovered that a certain "Bill Ackman" had also looked at the stock. According to a Bloomberg interview, he seemed to confirm my thesis.
Below is a summary of the price and value I had attributed at the time and the subsequent drop in the price. Of course, I realise that a bunch of short sellers would likely have sniffed this out and have sunken their ravenous teeth in, but I am not aware, it wasn't a play for my portfolio, but I could see some meat on that bone.
For me, Tesco is a great company, that has lost focus.
You are often bombarded with all manner of non-essential tat when you enter the store, e.g.: the recent push to sell, arguably "subpar" broadband products, or the never-ending pile of travel insurance and "subpar" banking product. By subpar I mean not best in class and containing limited features, or not competitively priced based on available benchmarks.
Come on Tesco, sell the underperforming bank and get back to basics, you know, groceries, that's why we go into your store in the first place.
Get that part right and we will consider the TVs, Clothing line et al! You have a great bakery; you make nothing of it and need to send your staff to M&S to see how it’s supposed to be done. My late dad was a baker and he'd turn in his grave if he knew I ate that stuff. It used to be good, it can be again, but you need to treat your supply chain better. I don't know if the scandals of supplier extortion are true or not, but you seemed to have chased market share and it's a failed strategy.
I have a limited perspective as regards this, it seems to lag almost all its closest competitors. My inability to purchase my favourite "Tesco Finest" Orange Juice with Juicy Bits is infuriating. It seems about four out of every five visits that they are not stocked with this, one of my favourite products. When I can't buy it, I don't buy the sugary imitations which Tesco seem to prefer to stock, I'd rather wait and do my entire shopping at Sainsbury's who do stock a decent alternative.
The Tesco Board of Directors have clearly made a good move in hiring Mr Lewis, we believe this will be the turnaround play of the century if it can be pulled off. We are not convinced at this stage however that the new CEO can turn the business without making some very specific changes to the management structure as much of the deadwood will need to be replaced if this business is to become anything more than a shadow of its former self.
After consideration of the numbers, it's my view that the Tesco share price is overpriced, even in the context of the huge fall it had, I believe the propensity is for it to go south again. Until we see some evidence of a sustainable turnaround, we are not touching the stock. Good Luck Mr Lewis. P.S. We have written to Mr Lewis and have not had a reply.
My Rant on TESCO.. If it's not good enough for Ackman it's not good enough for me. But don't take my word for it, I've just shopped there for twenty years and now I can't even taste the food!
Keywords:TESCO-IS-OVERVALUED-My-Rant-on-TESCO..-If-its-not-good-enough-for-Ackman-its-not-good-enough-for-me.-But-dont-take-my-word-for-it,-Ive-just-shopped-there-for-twenty-years-and-now-I-cant-even-taste-the-food!
Blog title: My Rant on TESCO..( 176 articles!)
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