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Five reasons once mighty leviathan is foundering...

By Staff Reporter

Published 23/04/2015

Tesco's property is not worth nearly as much as it thought

In fact, it's worth £4.7bn less that originally thought. Of this, £3.8bn is due to cash flow and property values while the remaining £925m is how much stalled development sites have cost. Tesco's big out-of-town branches have suffered as people stay home and order online instead. Tesco has already announced that it will close 43 stories and pull the plug on 49 development projects.

Last year's accounting scandal is still smarting

Tesco overstated it profits by £263m in October last year due to problems with a system that charged suppliers to place their brands in the best spots. In the aftermath, Tesco said it would put less focus on commercial income.

The 'kitchen-sinking' approach

Some analysts think Tesco boss Dave Lewis has intentionally bundled all the bad news at these results to clear the decks for a turnaround - which would make him look good in the long run.

Profit margins have got skinnier

Tesco's profit margin is down to just over 1% - a drop of 3.9% - as it tries to stay competitive while high-quality chains like Marks and Spencer slice from above and new budget stores bite from below.

The bargain-hunters have left the building

Tesco's value-conscious customers have switched to Aldi and Lidl. Tesco has already said it will cut its 90,000 products by a third, but it will not become a discount supermarket. Dave Lewis said yesterday that "one of our great advantages is that depth of range".

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