Tesco has tripped up but it will fight back

Tesco’s UK business is not broken, but the spell the grocer cast over the wider industry may well be.

After nigh on 20 years when Tesco could seemingly do no wrong, unseating Sainsbury’s as the top grocer and battling general retailers for share of non-food categories, the retailer has been exposed as fallible.

The most powerful immediate effect will be psychological. In Sainsbury’s glass citadel in Holborn and the northern strongholds of Asda and Morrisons, there will be renewed confidence that they can challenge the Cheshunt Goliath after they dealt it a bloody nose at Christmas.

And in the boardrooms of some general merchandise groups, Tesco’s seasonal tumble will give new heart to attempts being made to repel the supermarket onslaught.

But while Tesco’s travails may not be over and Philip Clarke’s improvement plans have still to be fully revealed, the retailer has only tripped, not fallen flat on its face.

Tesco came to dominance because of its retail prowess and restless quest to cater better for consumers – a capacity evident in a string of firsts from Clubcard to value ranges. It became famous too for a sense of paranoia, for behaving like a contender but not the champ.

It would be foolish to imagine that Tesco cannot recover from a slap down and return to the fray with fresh energy and determination. Clarke has acknowledged change is needed unlike others in similar situations in the past who denied the threats they faced.

There is no doubt that Cheshunt is marshalling its forces and will come out fighting.

Lessons of Peacocks

The future of value fashion group Peacocks hung in the balance as Retail Week went to press.

An apparently viable business has been brought low by the scale of debt following its move into private hands. In the boom years of private equity and similar deals such debt burdens were easily shouldered. In today’s austere conditions they are far less serviceable.

But private owners’ influence on retail should not be dismissed, despite high-profile failures. Boots was the biggest retail transaction at the height of private buyer interest and seems to be thriving.

It is not just how a business is financed that dictates its fortunes, but how it is run and how effectively it stays true to its purpose.