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As I begin this article we are just a few minutes away from a 2:00 pm Investor and Analyst Seminar presented by Tesco (LSE:TSCO) executives, outlining the company’s strategic priorities for “Winning in the new era of retail.” The presentation will be led by CEO Philip Clarke, UK Managing Director Chris Bush, Group Multichannel Director Robin Terrell, and CFO Laurie McIlwee.
The seminar has yet to begin, but, from what we already know, Mr. Clarke, his staff, and the Board of Directors have a clear understanding of their business, their market and their customers. They appear to be continuing to map and preparing to deliver on what is clearly a winning strategy.
One of the first things that impressed me was Mr. Clarke’s pre-seminar statement that “We’re going to make sure we have the most compelling offer.” I like what he said, because, when it comes to running a business, I love the word “compelling.” When the CEO understands that the key to success is to drive loyalty by distinguishing his brand from the others by offering a more compelling experience, it is then that he will have his company moving in precisely the right direction. “More compelling” trumps “more profitable” every time, because “more profitable” can mean a myriad of things, all of which are company-centric. “More compelling” is an argument that is clearly consumer-focused, a paradigm that will win customers over, exceed their expectations, secure their loyalty, and make the company more successful.
There have already been numerous headlines today emphasizing Tesco’s expected reduction of capital expenses. Might I be so bold as to say that those headlines have completely missed the point. The capex spending reduction is just one component of the overall transformation that is about to take place to “Build a Better Tesco.” In fact, whilst capex expenditure reductions are typically thought of as cutbacks, Tesco’s will be a slowing of its current pace of building brick and mortar locations as it redirects its resources more toward the company’s core products and toward broader offerings in areas like online and digital marketplaces.
Other headlines are insinuating that Tesco will become more like a discount retailer, but that is not going to happen. Clarke specifically said so. “You can’t ignore them. No retailer can. You have got to have sharper prices and better quality. But you can’t just be them, because you are not them.”
In truth, the focus is going to be on the larger store refresh program and investing in areas that the company has learned are the most consumer-centric and which are, therefore, the most compelling for its entire customer base. Indicating the company’s depth of understanding of consumer demands, Clarke has pointed out that some changes will be applied across the board, whilst others will be applied only regionally or locally.
None of what Tesco is saying today is a change of strategy. It is, in fact, an acceleration of the strategy that was previously introduced by Mr. Clarke two years ago. As Clarke explained, “I really think that biggest isn’t always best. Better is better.”
To see the webcast seminar in full, go to www.tescoplc.com. Tesco’s share price opened today at 334.85, sliding to 328.50 at the noon hour. Its price is currently 334.20.
