Yesterday, Tesco announced a record loss of £6.4bn – the worst in the supermarket’s history, the biggest in UK retail history, and the sixth biggest by any UK company.
To put that into perspective, that’s £202 per second and 53,109,888 cases of Tesco’s finest champagne, enough to fill 96 Olympic swimming pools.
And their losses can be summarised by four reasons:
1. Tesco’s property is not worth nearly as much as they thought. Their property valuation is now worth £22.9bn, a loss of £7.6bn in just one year.
2. Last year’s accounting scandal is still taking its toll – Tesco overstated profits by £263m in October last year.
3. Significant drop in profit margins – Tesco are locked in a fierce price war with Marks and Spencer for premium products, and with Aldi and Lidl for budget products.
4. Tesco have lost their value-conscious customers to Aldi and Lidl – Tesco will cut 90,000 products by a third in an attempt to win some of them back.
As always twitter was extremely sympathetic at this news:
I guess #Tesco will now understand what it is like to run a home on a tight budgetAdvertisement
— Martin Barrow (@MartinBarrow) April 22, 2015
#Tesco just lost more money (£6.4b) than over 40 of the world's smaller nation states individually make in a year
— Andrew Simms (@AndrewSimms_uk) April 22, 2015
— ben turner (@BreakyWakey_Ben) April 22, 2015
#Tesco total debt is now £21.7bn. That's £2.7bn more than value of the companyAdvertisement
— Adam Parsons (@AdamParsons1) April 22, 2015
Investors initially remained confident in Tesco’s ability to recover, after announcing the record loss. However, by midday, shares had dived by two percent and closed at 5 per cent down.
There has been an upwards trend today, demonstrating the majority analysts believe Tesco can recover from the nightmare year they’ve had. In January the supermarket giant announced 43 stores will be closed down – yet some analysts believe even more may have to be shut down in order to make a recovery