Grocer catches fast train: Tesco has stolen a march on its rivals by turning to rail freight to keep shelves stocked, says ALEX BRUMMER
Viewers of the landmark BBC series Ridley Road will recognise how Tesco became the UK’s biggest retail enterprise.
The opening by the late Jack Cohen of one of Britain’s first supermarkets in the East End in the early 1960s provoked a hate campaign by Colin Jordan and his National Socialist thugs.
When it comes to UK grocery, Tesco has been a pioneer. It was the first British grocer to open a 40,000 square foot superstore, it was a leader in out-of-town shopping, brought fuel forecourts to stores and did a reverse ferret into convenience in a nod to millennials.
Soaring profits: Tesco has raised its operating profits forecast for the full year to £2.5bn, where it should be above Covid levels and is promising a £500m share buyback
It is a pity that under the flawed leadership of Phil Clarke, followed by turnaround merchant Dave Lewis, the group retreated from international ambition.
As anyone who listened to Boris Johnson’s Tory Party speech will recognise, global is part of the ambition he has for the UK.
Tesco is the market leader in British grocery and embraced online earlier than competitors. It is unthinkable that it should be considered a private equity target in the aftermath of the Morrisons debacle.
The paradox is that the very people who helped build Tesco in modern times are at the heart of the Morrisons’ sell-off.
The presence of former chief executive Terry Leahy is what made the £7billion bid from Clayton, Dubilier & Rice (CD&R) credible.
Current Tesco chief executive Ken Murphy pointed out that the group is among the few where the shelf stacker, starting at age 16, can rise to the very top.
This possibly was an allusion to David Potts, the former Tesco executive, who is about to win the Morrisons lottery with a potential payout of £22million.
That’s a bit better than Tesco’s £9.55 per hour which is 7 per cent above the minimum wage.
Hardly generous when one considers that the previous chief executive, Lewis, headed off into the sunset clutching a cheque of £1.6million for seven months work and share options worth £13million.
Putting all that to one side, it is terrific that Murphy is not lining up with the serial whingers about a lost Christmas.
It is taking care of itself, arguing that although there may be ‘bumps in the road’ it has worked with suppliers.
It wants to make sure the shelves are stocked and is at 98 per cent capacity having embraced rail freight to lessen dependence on road. Why didn’t others think of that?
As for financial performance, investors can have few complaints. The company has raised its operating profits forecast for the full year to £2.5billion, where it should be above Covid levels and is promising a £500million share buyback.
This was enough to send the shares 6pc higher, placing a value of £21billion on the group.
With global interest rates set to rise and competition in the UK’s grocery market fierce, that might be enough to keep private equity ghouls at bay.
With Halloween around the corner you cannot tell.
Strong Arm
Nvidia is showing no signs of giving up its £40billion quest to become the proud owner of Cambridge-based Arm Holdings.
In a concession to EU competition regulators, Nvidia pledges that if the deal is approved it will maintain its neutral model, under which Arm’s smart chips are available to all potential users rather than for exclusive purposes.
One assumes that if it is able to convince the EU’s tough enforcer, then it might also be able to overcome objections from the Competition & Markets Authority (CMA). UK ministers, who don’t much like the deal, could invoke national security concerns.
The ideal outcome for the UK’s tech future would be a return to London Stock Exchange. That would be good for the Boris science and tech agenda.
Audit trail
When the CMA suggested that the audit market could be boosted by encouraging secondary players, the French firm of Mazars was among the first to reap a reward.
It was signed up by Goldman Sachs to do its European audit and was seen as a clean skin. Not any longer.
The accounting watchdog the Financial Reporting Council is hauling Mazars before the beak for its 2020 audit of French Connection.
The fashion retailer currently is being sold for £29million to a consortium headed by investor Apinder Singh Ghura. He has been warned.